Potential tax liabilities: -Stamp Duty – Capital Acquisitions Tax -Capital Gains Tax.

Stamp Duty.
To ensure an exemption from stamp duty, the transferee must obtain relief under Section 81 AA of the Stamp Duties Consolidation Act 1999 known as “Young Trained Farmers Relief”.

To obtain young trained farmers relief a number of conditions must be satisfied:

• The transferee must be under age 35 at the date of execution of the Deed.
• The transferee must hold one of the educational qualifications set out in schedule 2B of The Stamp Duties Consolidation Act 1999.
• Relief for holders of educational qualifications under previous versions of the relief specified in schedules 2 and 2A Stamp Duty Consolidation Act. These qualifications must be supplemented by further courses obtained before the 31st March 2008 in order to obtain the relief.
• Persons with a restricted learning capacity can satisfy this requirement provided that a letter is furnished to the Revenue Commissioners from Teagasc confirming in their capacity satisfactory completion of a Teagasc approved course for those who in the opinion of Teagasc are restricted due to physical sense or intellectual disability or mental health.
• Under Section 81AA where instruments are executed after the 2nd April 2007 and the transferee meets all requirements to obtain the relief except the educational requirement, the relief can be claimed provided the educational requirement is obtained within 4 years of execution of the instrument. In this regard the initial stamp duty liability must be paid and can be claimed back within a four year period after proof that the educational requirement has been met.

The Transferee must furnish a declaration that it is their intention to retain ownership of the lands for a five year period from the date of acquisition and that they intend to spend not less than 50% of their normal working time farming the said lands.

Clawback.

• If the Lands or any part thereof are disposed of within five years from the date of execution of the instrument under which property is acquired and the proceeds of sale are not re-invested in agricultural land within one year, the relief is clawed back by the Revenue Commissioners.
• Clawback is structured as a penalty proportional to the initial duty that would have been paid if the relief was not obtained, together with interest at 0.0273% per day.
• Where a Declaration has been made by a transferee to claim the relief, which transpires to be untrue, and the said declaration has been made knowing it to be untrue or in reckless disregard of the trust, clawback = penalty of 125% of initial liability plus interest at 0.0273% per day.

Capital Gains Tax.
Section 599 Taxes Consolidation Act, 1997; a disposal to a child (including favourite nephew/favourite niece) of qualifying assets is exempt from Capital Gains Tax provided a number of conditions are satisfied namely;

• Farmer making the disposal is over 55 years of age at date of execution of deed.
• It is not a condition of the relief that the farmer disposing of the qualifying assets retire from farming.
• Qualifying assets: Agricultural assets such as lands, machinery, buildings must be owner by the farmer for at least a ten year period ending with the date of disposal.
• The assets must have been used for the ten year period by the farmer.
• The assets must be disposed of at the same time as the lands and to the same person.

Clawback.

• As the relief from Capital Gains tax takes the form of a deferral of Capital Gains Tax, same may be withdrawn retrospectively if;
• In the event of the transferee disposing of the assets within 6 years, the transferee becomes liable to pay the deferred tax, which the parent would have liable for if the relief had not been granted.

Capital Acquisitions Tax.

• Gift of inheritance of land to a child or favourite nephew/favourite niece.
• Transferee/beneficiary must meet the “farmer test”; 80% of their assets including the assets being transferred to/inherited by them must be agricultural. Borrowings on principal private residence now deductible.
• If the farmer test is met; the market value of the agricultural assets is reduced by 90%.
• If the reduced value of the land exceeds the threshold currently standing at €496,824 for a child/favourite niece/nephew in 2007, Capital Acquisitions Tax (C.A.T.) is payable at 20% of the excess.
• A favourite nephew/favourite niece is deemed to be a child of the disponer/testator where the child is a child of a brother of sister of the disponer/testator and has worked substantially on a ful-ltime basis for the disponer/testator (more than 24 hours per week/15 hours per week in the case of a small business run exclusively by the disponer/testator and his/her spouse), on his/her farm for a period ending 5 years ending on the date of the gift/inheritance.

Clawback.

• If the agricultural assets are sold or compulsorily acquired within 6 years of the date of the gift/inheritance and not replaced within one year of the sale or 6 years of the compulsory purchase, the relief is clawed back.
• Development Lands; Where lands which have qualified for Agricultural relief are disposed of in the period commencing 6 years after the gift/inheritance and ending ten years after that date, the relief will be clawed back in relation to the development value of the lands at the date of the gift/inheritance.

If you would like to discuss your private client needs, please contact Malcomson Law by calling 01 8744422.

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