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Agri-food and the economy - capital gains tax measures
From Department of Agriculture, Food and the Marine
Published on
Last updated on
From Department of Agriculture, Food and the Marine
Published on
Last updated on
An indicative list of the Capital Gains Tax measures that are currently available (updated for changes introduced in Budget 2015) to the farming sector are listed here, along with a brief explanation. Please note that these do not purport to give a definitive legal interpretation of the various measures and individuals may wish to seek professional advice if availing of them.
Retirement Relief from Capital Gains Tax
Capital Gains Tax Relief on Farm Restructuring
Capital Gains Tax Relief for Transfer of a Site from Parent to Child
Capital Gains Tax Relief for Woodlands
Retirement Relief from Capital Gains Tax (CGT) is available where an individual, who is at least 55 years of age (with some exceptions such as chronic ill-health) disposes, by way of sale or gift, of the whole or part of his/her qualifying assets. Although the relief is commonly known as “retirement relief” a claimant does not have to retire in order to qualify. Retirement relief from CGT is available to non-agricultural businesses also.
An explanation of “qualifying assets” for CGT relief is provided here. Please note that some of the terms used have specific meanings for the purpose of the relief. Professional advice should be sought for more comprehensive explanations of “qualifying assets”.
Irrespective of the amount of consideration for the disposal, full relief may be claimed by an individual aged 55 – 65 years of age on the disposal of the whole or part of his/her qualifying assets to his/her child. Full relief may be claimed in respect of the consideration for the disposal of qualifying assets worth up to €3 million in the case of individuals aged 66 years or more with effect from the 1 January 2014. Where the consideration exceeds €3 million, relief will be given in respect of the CGT chargeable on any gain accruing on the disposal by individuals aged 66 or more as if the consideration for the disposal had been €3 million.
The upper limit on relief for transfers by individuals aged 66 years or more was introduced in Budget 2012, but a lead in period was flagged to allow for an orderly transition.
The relief is clawed back where the child disposes of an asset within 6 years of the date of acquisition from his/her parent. For parent to child transfer a child can include a child of a deceased child. Foster child or nephew/niece transfers may also qualify in certain circumstances provided further specific qualifying criteria are met.
From the 1 January 2014 where the disposal consideration does not exceed €750,000, relief from CGT is given in respect of the full amount of tax chargeable on the disposal in the case of an individual aged 55 – 65 years of age. The amount of full relief for individuals aged 66 years or more has been reduced from €750,000 to €500,000. This was introduced in Budget 2012, but a lead in period was flagged to allow for an orderly transition.
Where the consideration exceeds the thresholds set out above, marginal relief applies so as to limit the amount of tax chargeable to 50% of the difference between the amount of the disposal consideration and €750,000/€500,000 thresholds.
Changes introduced in Budget 2015 gives farmers who let their land on conacre and who ultimately dispose of their land to a person other than a child a once off opportunity to avail of CGT retirement relief, provided they satisfy the other requirements of the relief, where they either:
CGT relief for farm restructuring provides for a rollover relief for farm restructuring and parcel swaps with certain conditions to ensure a more efficient farm holding arises. To be eligible for the relief, the sale and purchase of qualifying land(s) must occur within 24 months of each other with the initial sale or purchase of qualifying land taking place in the period 1 January 2013 – December 2019.
The conditions attached to the EU State Aid approval also restrict the scope of the CGT relief to agricultural land only. Buildings on the land are no longer eligible for the relief with effect from 23 December 2014.
Relief is only available to claimants who are issued with a Farm Restructuring Certificate by Teagasc.
Stamp Duty Relief for farm consolidation allows for a 1% rate of stamp duty (as opposed to the general rate of 6%) where the land transactions qualify for a “Farm Restructuring Certificate” for the purposes of Capital Gains Tax Relief on Farm Restructuring. It will apply in relation to instruments conveying or transferring agricultural land that are executed on or after 1 January 2018 and on or before 31 December 2020. Where there is a purchase and sale of land within 24 months of each other that satisfy the conditions of consolidation, then stamp duty will only be paid to the extent that the value of the land that is purchased exceeds the value of the land that is sold. In addition both the purchase and sale must occur between 1 January 2018 and 31 December 2020. In such a situation stamp duty will only apply at the rate of 1% on the excess.
A clawback of the relief will apply where the land or part of the land purchased is disposed of or partly disposed of before the end of the 5 year holding period. Such a clawback will not occur where the land purchased is compulsorily acquired. Detailed guidelines on the operation of this relief are available to download at;
An exemption from CGT is available for the disposal of a site from a parent to a child where the transfer is to enable the child construct a principal private residence on the site. The market value of the site must not exceed €500,000. The area of the site (exclusive of the area on which the house is to be built) must not exceed 0.4 ha or 1 acre. If the child subsequently disposes of the site without having occupied a principal private residence on the site for at least 3 years, then the capital gain which would have accrued to the parent on the initial transfer will accrue to the child in addition to his/her own gain. However, a gain will not accrue to the child where he or she transfers an interest in the site to a spouse or civil partner. This measure is available to both farmers and non-farmers.
The CGT relief for woodlands applies where woodlands are being disposed of. The consideration for the disposal of trees growing on the land is not included in calculating the chargeable gain nor are insurance proceeds received on foot of destruction of or damage or injury to trees by fire or other hazard on such land. The relief applies to individuals only.