Explainer: Tax reliefs for family-run farms
Some of the tax relief options available for family-run businesses in the agricultural sector have been outlined by Tánaiste and Minister for Finance Simon Harris.
These include reliefs on transfer of farmland, farm consolidation and farm restructuring.
“There are a number of tax relief options available for family-run businesses in the agricultural sector,” the minister said, in response to parliamentary questions on the subject from Independent TD, Deputy Carol Nolan.
Young trained farmers
Minister Harris said: “The Young Trained Farmer (Stamp Duty) relief…provides a full exemption from stamp duty (which would normally be charged at a rate of 7.5%) on the transfer of farmland, subject to certain conditions being met.”
“The core purpose of the relief is to promote lifetime transfers of land and encourage more young people to pursue farming.”
Minister Harris added that a 1997 consolidation act “provides for a scheme of enhanced stock relief at the rate of 100% for ‘qualifying farmers’ (who are often referred to as young trained farmers)”.
On the subject of tax credit for succession farm partnerships, the minister said: “The succession tax credit is an annual €5,000 tax credit for succession farm partnerships.
"It was introduced to encourage experienced farmers to form partnerships with young trained farmers and to transfer ownership of their farms to those young trained farmers.”
Farm Consolidation Relief
The minister went on to describe the Farm Consolidation Relief, which he said “is to encourage the consolidation of farm holdings, to reduce farm fragmentation and so improve the operation and viability of farms”.
This may involve the selling and buying of land to consolidate the farm holding.
Sales, gifts or exchanges can lead to this relief, Minister Harris noted.
“The relief is available where farm holdings are consolidated by way of linked sales and purchases of land and where land is transferred as a gift or by way of exchange," he said.
“Stamp duty at a reduced rate of 1% (usual rate is 7.5%) is applied to the excess of the value of the land acquired over the value of the land disposed of, where the acquisition and disposal take place within a 24-month period of each other.”
Transferring land between relatives
Minister Harris also described Consanguinity Relief, which is available where agricultural land is conveyed or transferred to certain close relatives.
The finance minister said: “The relevant relationships for this relief include: lineal descendent (child, step-child, grandchild etc.), parent, step-parent or grandparent, husband, wife or civil partners, brother, sister, step-brother or step-sister, aunt or uncle and nephew or niece.
“Stamp duty at a reduced rate of 1% applies (usual rate is 7.5%).”
Minister Harris added that there “are other stamp duty reliefs which may apply to family-run businesses in agriculture”.
These include:
- Relief for certain leases of farmland;
- Relief for the transfer of a site to a child;
- Relief for certain family farm transfers;
- Relief for commercial woodlands;
- Relief for the transfer of single farm payment entitlements.
Farm restructuring and agricultural relief
Minister Harris also outlined a “relief for farm restructuring” from Capital Gains Tax (CGT).
He said: “The purpose of farm restructuring relief is to encourage the consolidation of farm holdings, to reduce farm fragmentation, and so improve the operation and viability of farms.
“The relief applies to a sale, purchase or exchange of agricultural land, where Teagasc has certified that a sale and purchase or an exchange of agricultural land was made for farm restructuring purposes.”
Looking at Capital Acquisition Tax (CAT) agricultural relief, Minister Harris said: “Tax legislation provides for relief from Capital Acquisitions Tax for gifts and inheritances of ‘agricultural property’ where conditions are met.
“Where the relief applies, it operates by reducing for CAT purposes the market value of qualifying assets by 90%.”
Stock Relief and 'wear and tear'
The minister also outlined that Irish farmers can also apply for a tax deduction for increases in stock values, which is known as “stock relief”.
“Stock relief is available to any person carrying on the trade of farming, the profits from which are chargeable to tax,” said Minister Harris.
“The person may be an individual or a company, carrying on the trade either solely or in partnership.
“The amount of stock relief is equal to 25% of the amount by which the value of farm trading stock at the end of an accounting period exceeds the value of farm trading stock at the beginning of the accounting period.”
Minister Harris also described the “wear and tear allowances” for capital expenditure incurred on certain farm safety equipment by a person in a trade of farming.
“Once certified, the expenditure can be written off at a rate of 50% per annum over two years,” he said.
In addition, the minister described a “‘wear and tear allowance” for capital expenditure incurred on slurry storage facilities "by a person carrying on a trade of farming".
He said: “This allows for qualifying capital expenditure incurred on the construction of slurry storage buildings and associated equipment to be written off at a rate of 50% per annum over a period of two years.”
