CAT Agricultural Relief was brought in to support Family Farms and Genuine Farmers. Revenue is concerned about its use and are seeking to block non farmers availing of this and other reliefs by tightening up rules and criteria, this process may inadvertently effect some family farms and genuine farmers if they do not have their affairs and farming arrangements in order.
CAT applies at 33% on Gifts and Heritances.
Agricultural Relief reduces the asset value by 90% for CAT calculation purposes.
Cumulative CAT exempt transfer thresholds apply to all persons:
• From Parent to Child – €400,000
• To Brother, Sister, Niece, Nephew, Linear Descendant – €40,000
• To Other – €20,000
Given current farm values, significant CAT can apply should the parties not Qualify for Agricultural Relief. The following criteria are required to qualify for Agricultural Relief:
1. The 6 Years Rule: The recipient must be an active farmer or lease to an active farmer for a period of six years from receipt of the farm asset.
2. The Asset Test: Upon receipt of the farm asset 80% of the recipient’s total assets must be agricultural in nature.
3. Disposer 6 Years Rule: A requirement to actively farm or lease to an active farmer in the six years prior to disposal is now being put in place.
The Active Farmer definition is also becoming a matter of focus, up until now more or less anyone with a herd or tillage number and submitting a farming income in their annual tax returns was considered an Active Farmer. These requirements will still apply together with probably a BISS application. However, there are now so many different farming operating structures and part-time farmers, those without a farming qualification may have to prove at least 50% of their time is spent farming. While persons in share farm or farm partnership arrangements are generally active farmers, those operating farm companies may not be active farmers themselves, you and the company are two separate entities. Proper Revenue Stamped Leases may be required between the owner and the farmer company. The farm operating structure may need to be looked at, partnership arrangements are generally better suited to succession planning and inheritance tax.
A Consequence for those Leasing Out
• You need to be certain you are leasing to an active farmer
• Has the person / entity an Agricultural Qualification
• If no Agricultural Qualification, is the person / entity 50% time farming (Herd Number, Tillage Number, Tax Number, Tax Returns)
• Have you a Revenue Stamp Certificate for the Lease
Where Agriculture Relief is a problem Business Relief is an option. Business Relief applies to:
– The transfer of a business
– The transfer of a share in a business
– The transfer of shares in a company carrying on a business
Minimum periods of ownership and operation pre and post transfer apply, typically 6 years.
The Ideal
The ideal is to Qualify for Agricultural Relief. The Owner having owned and farmer the land for at least 10 years then if retiring either:
1. Transfer to a qualifying young farmer, or
2. Lease to a qualifying active farmer for at least 6 years.
