This year’s budget introduced significant changes for farmers and land owners. The purpose of this article is to highlight some of those changes so that you can take action before the end of December 2014 if required.
Capital Acquisitions Tax – Agricultural Relief
With effect from 1st January 2015 Agricultural Relief will be available only in respect of agricultural property gifted to or inherited by active farmers and to individuals who are not active farmers but who lease the property on a long term basis for agricultural use to active farmers. The Finance Bill for 2014 which was published on Thursday last sets out the definition of an “ active farmer”.
The Bill has defined an “active farmer” as someone who spends not less than 50% of his/her normal working time farming the land on a commercial basis and with a view to the realisation of profits. The person must remain actively farming the lands for six years after the gift/inheritance.
To qualify for the relief, the current “farmer” test (that at least 80% of the individual’s assets must consist of agricultural property after taking the gift or inheritance) must also be met by the beneficiary. The changes will apply to all gifts or inheritances taken after 1st January 2015.
Stamp Duty – Consanguinity Relief
Consanguinity Relief halves the applicable rate of stamp duty on transfers of non-residential property to certain relatives and is due to expire on31st December 2014. The current rate of stamp duty on the transfer of non- residential property is 2% – this applies if the transferee (person receiving the gift) does not hold a green cert – this rate may be halved if the person receiving the gift is a relative of the Transferor. This beneficial tax relief is expiring at the end of the year.
However, Consanguinity relief will be extended for a period of three years in certain circumstances where the transferor is 65 years or under and the transferee is an active farmer.
Capital Gains Tax Retirement Relief
The CGT retirement relief will be amended so that land that is being leased for up to 25 years in total will qualify for relief. This will be an increase to the present total period of 15 years.
The impact of the new rules means that if you are the owner of land and you are considering a transfer of your land to a son or daughter who is not in full time farming and who does not currently spend 50% of their normal working time farming then you should consider completing a transfer of those lands before the 31st December 2014 . This is because as and from 1st January 2015 an individual who is not an” active farmer” will not be entitled to avail of agricultural relief . This is a significant tax relief which reduces or eliminates the amount of tax payable by the person receiving the gift/inheritance depending on the value of the gift/inheritance.
Furthermore if you wish to transfer property to an son/daughter who is not an” active farmer” and does not currently hold a green cert then you may transfer the property to that person prior to the end of December 2014 and that person can avail of consanguinity relief paying only 1% stamp duty.