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Farm Retirement Scheme.

Dáil Éireann Debate, Tuesday - 30 March 2004

Tuesday, 30 March 2004

Questions (122)

Michael Ring

Question:

235 Mr. Ring asked the Minister for Finance the implications which the leasing of land by persons involved in the farm retirement scheme will have on their tax affairs. [9715/04]

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Written answers

A farmer who wishes to avail of the Department of Agriculture and Food administered early retirement scheme must transfer or lease his or her lands and cease all commercial farming activity. The scheme provides for a pension for retiring farmers of up to €13,515 a year for up to 10 years and I am informed by the Revenue Commissioners that this income is taxed in the normal way.

I am informed by the Revenue Commissioners that a retired farmer is obliged to return the rental income receivable from the lease of farmland in his or her annual return of income. However, specific provision is made for the exemption of such income from tax, subject to certain limits, in section 664 of the Taxes Consolidation Act 1997 where the income arises from the lease of farmland on an arm's length basis for a term of at least five years. I made a number of significant improvements to this exemption scheme in section 14 of Finance Act 2004 which apply to leases taken out from 1 January 2004. The annual tax exemption limit has been increased from €5,078.95 to €7,500 for leases of five or six years with the annual tax exemption limit increasing from €7,618.43 to €10,000 where a lease is for a period of seven or more years. I also reduced the minimum qualifying age for farmers eligible to avail of this scheme from 55 years to 40 years. If the lease does not meet the conditions for exemption, the leasing income is taxable.

I am also informed by the Revenue Commissioners that, under section 598 of the Taxes Consolidation Act 1997, there is provision for relief from capital gains tax, CGT, in the case of an individual who disposes of land which has been leased under the early retirement scheme. The relief applies where the land was owned by the individual for a period of ten years or more prior to such a lease and was used by him or her for the purposes of farming throughout that period. To qualify, the individual must be at least 55 years of age at the time of the disposal. Full relief is available where the proceeds from the disposal do not exceed €500,000. In such a case, no tax is charged on the gains arising. If the proceeds exceed €500,000, marginal relief may apply. Alternatively, if the disposal of the farmland is to a child, full relief from CGT without limit is available. Also, the definition of "child" is wide and extends to a nephew or niece who has worked full-time on the farm for a period of five years prior to the date of disposal.

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