A married farm couple have won a €137,914 Capital Gains Tax (CGT) battle with the Revenue Commissioners arising from a €950,000 sale of 16.5 acres of farmland.
This follows the Tax Appeals Commission (TAC) ruling that the Revenue Commissioners’ CGT assessment of €137,914 issued in 2016 should be reduced to ‘nil’.*
The couple appealed the €137,914 Revenue assessment to the TAC and in the just published ruling, Commissioner, Clare O’Driscoll has ruled that the appellant and his wife are each entitled to ‘retirement relief’ on the Capital Gains Tax chargeable on the land sale.
Ms O’Driscoll found that this was the case as the couple were aged between 55 and 66 at date of sale in 2005 and the consideration for each did not exceed €500,000.
Ms O’Driscoll also found that as the land was jointly owned by the couple it follows that the consideration received by the farmer and his wife on the disposal of the land was in the amount of €475,000 each.
Ms O’Driscoll also found the land sale was a chargeable asset where retirement relief can be applied.
The couple were joint owners of 20 acres of lands which they purchased for IR£195,000 (€247,650) in 1991.
In her ruling, Ms O’Driscoll accepted that the farmer and his wife both farmed their lands from 1993 to 2005 despite a Revenue claim to the contrary.
Up until 2002, the couple stocked deer on the land but the deer farming enterprise proved to be unsuccessful under which serious losses arose.
No Capital Gains Return was filed in relation to the sale of the land at the time and was eventually made in 2015 after Revenue issued a Notification of Revenue Audit to the farmer in relation to Income Tax and CGT for the tax years 2005 to 2014.
The parties got married in 1969 and they farmed together from the beginning of their marriage and the wife would rear the calves, do the yard work, feed the animals and assist with fencing as well as doing the banking for the farm.
The woman did the bulk of the work as her husband’s health had deteriorated which left him debilitated, unable to farm and this resulted in the family becoming very poor and having to sell their first farm.
In sworn evidence at the TAC hearing, the husband submitted accounts for the years 1996 and 1997 with the accounts for 1996 recording gross farm income of €336 and a loss of €9,262.
The accounts for 1997 recorded gross farm income of €2,969 and a loss of €1,403.
After the couple sold off the loss-making deer, they struck a deal with a neighbouring farmer to cut and harvest the grass and neighbour submitted a letter to the TAC that he purchased hay, silage and grass from the couple from 2002 to 2005.
The couple submitted lodgements from the neighbour for the sale of grass amounting to €2,350 in 2002, €3,000 in 2003 and €1,500 in 2004.
Revenues stated that the couple had failed to advise of the June 2005 sale until October 2015 - over ten years after the return filing date.
Revenue argued that for retirement relief to apply, the couple had to demonstrate that the land was used for farming purses and argued that the lands were not used for the purpose of farming after 1998 on a number of grounds.
Revenue stated the farmer had ceased for Income Tax with effect from November 1998; that there is an absence of farming accounts / records between 1998 and 2005; that the sale of grass from the land is not sufficient to establish that farming occurred and there is no evidence that a partnership existed between the Appellant and his wife in relation to the farm.
Revenue submitted that the totality of the evidence points to the conclusion that farming activity was not carried out on the land for the period of 10 years up to the disposal of the land. However, Ms O'Driscoll rejected the Revenue argument in favour of the couple.
*This article was updated on February 3, 2023, to correct this figure.