The transfer of ownership of the family farm from one generation to the next is a significant event in the history of any farming family. The focus of this article is on one aspect of farm transfers i.e. the relief from stamp duty which is currently available to the person receiving the gift who is known as the transferee provided that the transferee satisfies certain conditions.
Stamp Duty is a tax payable to the Revenue Commissioners by the Transferee and is dependent on the nature and value of the assets being transferred. The rate of stamp duty on the disposal of non-residential property is currently 2% of the market value of the property. This stamp duty rate was introduced in the Budget in December 2011 and replaced the then existing regime of incremental stamp duty rates linked to the value of the property being transferred. The top rate prior to the Budget in December 2011 was 6% if the value of the property exceeded €80,000.00 so the introduction of a 2% flat rate was a significant reduction. Where a transfer takes place between a parent and a son or daughter the stamp duty rate of 2% is halved so that in effect the person receiving the gift (”the transferee”) pays stamp duty at the rate of 1%. This relief is known as consanguinity relief.
There are circumstances however where the entire transaction may be exempt from the payment of stamp duty and this exemption arises in respect of the transfer of agricultural land to young trained farmers. In order to qualify as a young trained farmer the transferee must meet several conditions. The current conditions that have to be met are as follows:
The person to whom the assets are transferred must be under the age of 35 years at the date of transfer. This means that the transfer must take place before the 35th birthday of the transferee. One of the documents that will be required in respect of the transfer is a copy of the birth certificate of the transferee to prove their date of birth and hence their age.
He/she must have obtained certain specified agricultural qualifications. The specified qualifications include those awarded by FETAC, HETAC and other third level institutions. The most well known of these qualifications is the ‘Green Cert’. Other courses which have been certified by Teagasc and the National Qualifications Authority of Ireland as being equivalent to those courses also qualify. Full details regarding course qualification is available from Teagasc and your local Teagasc office is your first point of contact to determine if you qualify as a young trained farmer.
All paperwork must be submitted to the Revenue Commissioners for their approval. Original or certified copy documents must be submitted to the Revenue to verify the qualifications obtained.
The young trained farmer must furnish a written declaration to the Revenue Commissioners confirming that for a period of five years from the date of execution of the instrument, he/she intends to spend no less than 50% of his/her normal working time farming the land and he/she will retain ownership of the land for that period. This is a very important provision and is sometimes overlooked. It is particularly important if the transferee is in full time employment at the time of the transfer and for the five year period after the transfer. The Revenue Commissioners may query the position with the transferee after the transfer so as to explain how the transferee meets the criterion of spending not less than 50% of his normal working time farming the land if he is in full time employment. It is an issue that requires careful consideration prior to the transfer.
The Transferor and Transferees PPS numbers and tax categories must be supplied with the paperwork.
The land transferred must be agricultural land. This can include farm buildings and farm houses.
This is a general overview of the stamp duty relief currently available to a young trained farmer on the transfer of the family farm. It is to be noted that the relief is also available if a young trained farmer purchases farm land. It is not known at this stage if the forthcoming budget will change these stamp duty rules. However it is certainly a point to be considered if you and your family are considering the transfer of the family farm at this point in time. Any specific queries that you may have regarding the relief should always be discussed with your solicitor.