Written Answers. - Tax Code.

John Perry


516 Mr. Perry asked the Minister for Finance if his attention has been drawn to the correspondence referred to him by the Department of Agriculture and Food from a person (details supplied) in County Leitrim; if he will review the case; if this person is exempt from income tax; and if he will make a statement on the matter. [2004/99]

Under section 664 of the Taxes Consolidation Act, 1997, 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.

These tax exemptions apply only in respect of leases to qualifying lessees. In this context, "qualifying lessee" specifically excludes from the scope of the relief any leases made between closely connected relatives. 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 a standard anti-avoidance measure without which the relief would be open to manipulation with spurious arrangements being set up, such as the passing back to the lessee of rent on which tax relief had been claimed by both.

I should also point out that there are already very generous stamp duty and capital acquisitions tax reliefs available in the case of permanent transfers of land between family members, such as by gift or sale. For all these reasons, I do not propose to provide an exemption from income tax from a farm land lease entered into between related persons whether for the purposes of the early retirement scheme or generally.
I am informed by the Revenue Commissioners that the taxpayer has income from a farmer's early retirement pension from the Department of Agriculture and Food, the lease of land to his son and part-time employment. The Commissioners have no record of any correspondence from the taxpayer concerning the lease of land to his son. Given the level of his income, the taxpayer is liable to make annual returns of income to the inspector of taxes under the self-assessment system. The inspector has carried out a review of the taxpayer's income tax liability, including PAYE tax, for 1997-98. The review shows that the taxpayer overpaid £126.28 in that year. A balancing statement and a cheque for £126.28 will be issued to the taxpayer in the next few days.