Farm Ireland

Tuesday 11 December 2018

'Succession partnerships under threat after Stamp Duty changes'

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Margaret Donnelly

Margaret Donnelly

Changes to Stamp Duty on land transfers in the Budget could be the death kneel for succession partnerships, according to a leading tax advisor.

The Head of Tax with IFAC, Declan McEvoy, says the new Stamp Duty rates have a direct knock-on effect on succession partnerships as future tax implications remain unknown.

He said a lack of clarity around Stamp Duty after 2020 means that anyone entering a Succession Partnership, which typically happens over five years, would not know what rate of Stamp Duty they would face three years into the agreement and the future Stamp Duty bill could wipe out any tax savings.

Families may now revert back to waiting until the owner dies and leaving land to the successor in their will, as Stamp Duty bills incurred through transferring land through a partnership could be prohibitive.

“The Registered Succession Partnership is an agreement in order to enter into a legally binding arrangement whereby the farm would be transferred three years after entering into the Partnership and no later than 10 years after entering into it. 

“The benefit from a taxation point of view is that it brings a €5,000 tax credit for up to five years to be shared between the Transferor and Transferee in the same proportion to their profit sharing ratio. There is a ceiling in that the transferor must take place before the Transferee reaches 40 years of age.”

However, he said that there has always been concern about entering into an arrangement where one did not know the tax consequences when one was signing it over at some stage in the future.

“Now with Budget 2018 ring fencing consanguinity relief up to the end of 2020 at 1pc and the likelihood that the rate of stamp duty will increase to 6pc after 2020, why would one enter into a legally binding arrangement whereby one agrees to transfer the farm, say in 2022, when one could be looking at 6pc rate of stamp duty with no certainty around same?”

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He said that on a farm, valued at €1m, where the incoming farmer does not qualify for Young Trained Farmer stamp duty exemption, they would be looking at a 1pc stamp duty (€10,000 for the next three years) but, after that, one could be looking at a potential liability of €60,000.

"The maximum tax credit benefit will be €25,000. Why would one enter into this?"

He called on the Minister for Agricutlure to ensure that when the Finance Bill is being passed, an amendment is made to allow anyone who enters into a binding Registered Succession Partnership before the end of 2020 have the benefit of the Consanguinity relief available to them for inter-family transfers.

Changes to the rate of Stamp Duty in the Budget saw them go from 2pc to 6pc for agricultural land.

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