Farm Ireland

Monday 22 October 2018

Advice: Why Agricultural Relief terms are far from straightforward

A beneficiary or a lessee, who does not have the required agricultural qualification must farm the property for at least 50pc of normal working time
A beneficiary or a lessee, who does not have the required agricultural qualification must farm the property for at least 50pc of normal working time

I have received many queries from farmers considering farm succession since the Government introduced changes to the Capital Acquisition Tax (CAT) rules in relation to Agricultural Relief in 2014.

While the queries tend to cover all aspects of the CAT legislation, the most common and complex ones relate to situations where the beneficiary may not be in a position to engage in active or full time farming and whose only option may be to lease the land to a qualifying farmer.

In this article I will attempt to provide answers to those queries.

The importance of Agricultural Relief can be simply defined as a 90pc reduction in the value of agricultural property being transferred - this will remove the likelihood of a tax liability arising in the vast majority of cases where the beneficiary meets all of the other conditions of the relief.

Apart from the condition of who qualifies to farm the land the other main condition is meeting the 80pc agricultural property requirement.

Definition of 50pc normal working time

A beneficiary or a lessee, who does not have the required agricultural qualification must farm the agricultural property for at least 50pc of his or her normal working time. A 40-hour working week is taken as indicative of normal working time. Therefore, farmers with off-farm employment may qualify for agricultural relief where, averaged over a year, they work on the farm for at least 20 hours per week.

However, if a person can show that his or her normal working time is somewhat less than 40 hours per week, the 50pc requirement will be applied to the actual hours worked. This is subject to the farmer being able to show that the farm is farmed on a commercial basis and with a view to the realisation of profits. People in certain employments, such as teachers, will satisfy the 50pc normal working time requirement.

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'Active farmer' requirements

Where a beneficiary intends to start farming but is genuinely unable to do so immediately from the valuation date because of existing work/study commitments or other personal circumstances such as living/working abroad, the relief will not be refused once the beneficiary begins actively farming the land within one year after the valuation date of the gift or inheritance.

Records required by Revenue

No additional records, over and above those required for tax purposes generally, should be necessary to establish that a person actively carries on farming activities.

It should normally be clear from the level of farming activity carried on and the normal books and records of the farm, including purchases, sales, livestock records, etc. A farmer is not expected to keep a timesheet of hours worked on the farm.


The farming of forestry land is generally less labour intensive than other farming activities.

Revenue recognises that such land can be actively farmed on a commercial basis with a view to making a profit even though it may not require 50pc of a person's normal working time.

If a farmer can demonstrate that the forestry is actively managed on a commercial basis - even if much of the work is subcontracted to third parties - this, together with the normal books and records required for tax purposes, should normally be adequate to enable Revenue to determine whether relief is due.

Agricultural qualification

Agricultural relief can be availed of on a conditional basis where a required agricultural qualification is achieved within a four-year period of the date of the gift/inheritance.


There is no restriction on the number of leases a beneficiary can enter into provided the qualifying conditions are met for each lease and for each lessee.

Tenants' obligations

The beneficiary should establish that the lessee has the required farming qualification and the lease should provide for this.

In addition the lease should contain a clause requiring the lessee to farm the land so as to satisfy the 'active farmer'/'working time' requirement for the duration of the lease.

The lease should provide that any breach of these requirements will result in the termination of the lease.

Where there is an existing lease in place when the beneficiary inherits or is gifted the farm

Provided the land is farmed for a period of at least six years from the valuation date, whether by the beneficiary or by a lessee the relief is available.

If the existing lease ends within, say, two years of the valuation date the owner can either farm the land or let it for qualifying farming purposes for the remainder of the required six-year period.

Amount of time available to find a replacement lessee where a lease collapses

If the beneficiary re-lets the farm within a one year period after the termination or surrender of the lease, a clawback of relief will not arise.

Proportion of the property inherited that is required to be leased.

Revenue state that provided that 'substantially the whole of the agricultural property' that was inherited is leased, the relief will apply.

Revenue will accept that substantially the whole of the property means at least 75pc of the property by value.

This could accommodate a situation where a dwelling house formed part of the Agricultural Property acquired but obviously would not form part of the land lease.

This could enable the recipient to reside in the house, allow a relative to reside in it, leave it vacant or retain it as a holiday home.

Leasing to a farming company

The relief also applies where the farmland is leased to a company whose main shareholder is a working director who farms the agricultural property on behalf of the company and who meets the 'active farmer' conditions. Satisfying the 80pc asset test

The 80pc asset test which requires the beneficiary to satisfy the requirement that 80pc of his/her total property is comprised of agricultural property applies on the valuation date only.

Amount of Relief available There is no upper or lower limit to the amount of Agricultural Relief available.

Martin O'Sullivan is the author of the ACA Farmers Handbook. He is a partner in O'Sullivan Malone and Company, accountants and registered auditors;

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