Selling farmland, transferring a farm to a child or restructuring an agricultural holding can have significant tax consequences.
There are several tax reliefs available to farmers in Ireland, but the conditions can be detailed. The relief that applies will depend on what is being transferred, who is receiving it, the farmer’s age and how the land or business will be used after the transfer.
The main areas to consider include Capital Gains Tax (CGT), Capital Acquisitions Tax (CAT) and Stamp Duty.
Capital Gains Tax on Farm Land and Assets
Capital Gains Tax may arise when you dispose of an asset such as farmland, buildings or other qualifying assets.
A disposal does not necessarily mean that you have sold an asset for cash. For example, transferring an asset by way of a gift can also have CGT implications, with market value potentially being used when calculating the gain.
The standard CGT rate for most gains is 33%, and individuals have an annual personal exemption of €1,270. Even where a relief or exemption means that no CGT is payable, a return may still be required.
For farmers, the following reliefs may be particularly relevant.
Retirement Relief
Despite its name, you do not necessarily have to retire from farming to qualify for Retirement Relief.
If you are aged 55 or over, you may qualify for relief when disposing of all or part of your farm or farming business, provided the relevant conditions are met.
Different rules and limits apply depending on whether the farm is being transferred to a child or to someone outside the family.
For transfers to a child from 1 January 2025, the relief is restricted to €10 million for transfers where the farmer is aged between 55 and 69. For farmers aged 70 or over, the limit is €3 million.
For transfers outside the family, the relevant lifetime limits are generally €750,000 for disposals where the farmer is aged 55 to 69 and €500,000 where the farmer is aged 70 or over.
There are detailed conditions and clawback provisions, so the relief should be considered before a transfer is agreed.
Transfer of a Farm or Business to a Child
If you are considering transferring your farm to a son or daughter, it is important to look at the tax position before the transfer takes place.
Retirement Relief may reduce or eliminate CGT where the qualifying conditions are met. However, the value of the assets being transferred, your age and the circumstances of the transfer can affect the relief available.
There can also be consequences for the person receiving the farm, including CAT and Stamp Duty.
If the child later disposes of assets transferred under Retirement Relief within the relevant period, the relief may be clawed back in certain circumstances.
Farm Restructuring Relief
Farmers who sell and purchase land to make their farm holdings more efficient may be able to claim Farm Restructuring Relief from CGT.
The relief can apply where farmland is sold and replacement farmland is purchased, or where qualifying land is exchanged. The transactions generally need to take place within 24 months of each other and the restructuring must result in the land being brought closer together.
A Farm Restructuring Certificate from Teagasc is required.
Where the replacement land costs at least as much as the land sold, full CGT relief may be available. Where less is reinvested, partial relief may apply.
The current relief applies to qualifying transactions where the first sale, purchase or exchange takes place between 1 January 2013 and 31 December 2029.
Transfer of a Site to a Child
A parent may be able to transfer a site to a child for the construction of the child’s principal private residence without a CGT charge, provided the relevant conditions are satisfied.
There are specific limits and conditions attached to this relief, including requirements concerning the use and disposal of the site or property.
The value of the site can also affect the child’s Capital Acquisitions Tax position. This is something that should be considered before the transfer is made.
Capital Acquisitions Tax on Gifts and Inheritances
Capital Acquisitions Tax, commonly known as CAT, can apply when agricultural land, a farm or other assets are received as a gift or inheritance.
The current CAT rate is 33%, but tax is only charged on the taxable amount above the relevant group threshold.
For benefits received on or after 2 October 2024, the thresholds are:
- Group A: €400,000
- Group B: €40,000
- Group C: €20,000
Previous gifts and inheritances within the same group are taken into account when calculating the available threshold.
There is also a small gift exemption of €3,000 per person per calendar year, subject to the relevant conditions.
Agricultural Relief
Agricultural Relief can significantly reduce the taxable value of qualifying agricultural property for CAT purposes.
Where the conditions are met, the taxable value of qualifying agricultural property can be reduced by 90%.
The relief can apply to agricultural land, certain buildings, livestock, machinery and farm payment entitlements. However, there are important conditions, including an asset test and requirements relating to farming or leasing the agricultural property.
For example, the recipient may need to satisfy the Active Farmer Test by farming the property on a commercial basis for at least six years, or leasing it to someone who does so. Qualification and working-time requirements can also apply.
If the conditions are not maintained, the relief can be withdrawn or clawed back.
Business Relief
If agricultural property does not qualify for Agricultural Relief, Business Relief may be relevant in certain circumstances.
Business Relief can reduce the taxable value of qualifying business property by 90% for CAT purposes.
However, it does not apply to every farm asset simply because that asset is used in a business. The type of property and the way the business operates are important when determining whether the relief is available.
Favourite Nephew or Niece Relief
In certain circumstances, a nephew or niece who has worked full-time in a business or farm may qualify for special treatment for CAT purposes.
Where the conditions are satisfied, the nephew or niece may be treated as receiving the Group A threshold rather than the normal Group B threshold.
This relief has specific requirements, including conditions relating to the work carried out in the farm or business. It should therefore be checked before a transfer is made.
Stamp Duty on Agricultural Land
Stamp Duty can apply when agricultural land is transferred by sale or gift.
There are, however, several reliefs that may reduce the amount payable in qualifying circumstances.
Consanguinity Relief
Consanguinity Relief can reduce the Stamp Duty rate on certain transfers of land between related people.
The relief is subject to conditions, including requirements concerning farming or leasing the land and, in some cases, agricultural qualifications and the amount of time spent farming.
The current Revenue guidance should be checked before relying on the relief.
Young Trained Farmer Relief
Young Trained Farmer Relief can provide relief from Stamp Duty on qualifying transfers of agricultural land.
Among the conditions, the person receiving the land must generally be under 35 when the transfer is executed, meet the relevant agricultural qualification requirements, submit a business plan to Teagasc and meet the farming requirements.
The relief has been extended and is currently available for qualifying instruments executed on or before 31 December 2029.
Farm Consolidation Relief
Farmers who sell land and purchase other land to consolidate their holding may also qualify for Farm Consolidation Relief.
The transactions generally need to take place within 24 months, and a Teagasc consolidation certificate is required.
Where the conditions are met, Stamp Duty can be reduced on the qualifying transaction. The relief also has ownership and farming requirements.
Why You Should Take Advice Before Transferring Farm Land
Agricultural tax reliefs can be valuable, but they are not automatic.
A transfer that looks straightforward can involve several different taxes at the same time. For example, transferring farmland to a child may involve considering CGT for the person making the transfer, CAT for the person receiving it and Stamp Duty depending on the circumstances.
There may also be clawback provisions if the conditions attached to a relief are not met.
For this reason, it is important to consider the tax position before signing a contract, transferring land or making a gift.
Tax Advice for Farmers in Carrick-on-Shannon and County Leitrim
Farm transfers and succession planning can involve significant financial and legal decisions.
If you are considering selling farmland, transferring a farm to a family member, gifting agricultural land or restructuring your holding, Carol McCormack Solicitors can advise you on the legal aspects of the proposed transfer and work with your accountant or tax adviser where specialist tax advice is required.
Contact Carol McCormack Solicitors in Carrick-on-Shannon to discuss your proposed farm transfer or succession plans.
Important: Tax rules and reliefs can change, and eligibility depends on the individual circumstances of each transaction. This article is provided for general information only and should not be relied upon as tax advice. You should obtain current tax advice from your accountant or tax adviser before proceeding with a transaction.