Vol. 480 No. 6
224 Mrs. T. Ahearn asked the Minister for Finance the reason there is a different taxation level for retired farmers who have leased to family members; the proposals, if any, he has to end this inequity; and if he will make a statement on the matter. [14870/97]
Under section 10 of the 1985 Finance Act, there is an exemption from income tax in respect of the first £ 4,000 of annual leasing income where the leasing is for a period of not less than five years and in respect of £ 6,000 where the leasing is for a period of not less than seven years. The exemptions are available to lessors of agricultural land aged 55 years or over or to those who are permanently incapacitated by mental or physical infirmity from carrying on farming.
The tax exemptions in respect of leased land are available to qualifying lessees. In this context qualifying lessee specifically excludes from the scope of the relief any leases made between closely connected relatives. The question of connection is determined by reference to section 131 of the 1996 Finance Act which is the standard test for connection for income tax purposes. Previously, section 16 of the Finance (Miscellaneous Provisions) Act, 1968 applied the same test. A person is connected with an individual if that person is the individual's husband or wife, or is a relative, or the husband or wife of a relative of the individual or of the individual's husband or wife. A relative in this context is defined as meaning brother, sister, ancestor or lineal descendent. The restriction covering leasing to closely connected relatives is an anti-avoidance measure without which the relief would be open to manipulation with spurious arrangements being set up, such as the passing back of rent on which tax relief had been claimed by the lessee.
In the case of more permanent transfers of land between family members such as by gift or sale, very generous stamp duty and capital acquisitions tax reliefs already apply. It should not be necessary to provide an incentive to encourage land leasing between family members especially one which is open to abuse as mentioned above.
