Phil Hogan
Question:156 Mr. Hogan asked the Minister for Finance the purpose of the asset test by the Revenue Commissioners under the capital tax code. [9631/00]
Written Answers. - Capital Acquisitions Tax.
Agricultural and business reliefs apply under the capital acquisitions tax legislation whereby the value of gifts or inheritances received may be reduced by 90% for CAT purposes, subject to certain qualifying conditions. These are very generous reliefs and at present, a farm or business valued up to £3 million can be transferred to a son or daughter free of CAT. Agricultural relief applies only where the beneficiary's assets are 80% or more made up of agricultural assets after the gift or inheritance. Qualifying agricultural assets include land, buildings, livestock and machinery.
The 80% asset test rule for agricultural relief was introduced in order to exclude individuals with substantial non-agricultural assets from qualifying for the relief. This asset test does not apply in the case of CAT business relief. However, other conditions must be met under this relief which do not apply to agricultural relief, for example, a minimum share holding requirement in the case of shares in a company acquired by gift-inheritance and a minimum period of ownership requirement by the disponer. CAT business relief is aimed at entrepreneurs with a stake in their own business. It does not apply to the transfer of individual business assets. Agricultural relief, on the other hand, facilitates the transfer of individual farming assets. Some of the conditions which must be met for the purposes of business relief, would if brought to bear for agricultural relief purposes, be viewed as restricting the availability of the latter.
The Finance Act, 2000, enables agricultural property to qualify for business relief, where the relevant criteria are met, in circumstances where it fails to qualify for agricultural relief. The Act also closes off loopholes in the law through which persons can get around the 80% asset test by the temporary disposal of non-agricultural assets and their later reacquisition after relief has been claimed.
CAT agricultural relief is intended to apply specifically to farmers and it is important to apply some yardstick in order to determine whether or not an individual is a farmer. The 80% test was devised to act as such a yardstick. The requirement that 80% of an individual's assets be comprised of agricultural property ensures that the relief is focused on genuine farmers rather than on individuals who have substantial holdings of non-agricultural assets and who may be engaged in farming.