Dáil Éireann Debate, Thursday - 8 May 2014
53. Deputy Sean Fleming asked the Minister for Finance the taxation situation regarding a person who transfers agricultural land which they are farming to their child who is in their early 30s but does not have a green certificate; the taxation threshold and rates on such land transfers; and if he will make a statement on the matter. [20793/14]
View answerI am informed by the Revenue Commissioners that the following tax issues are relevant to the circumstances the Deputy mentioned.
Capital Gains Tax
The transfer of land by a person to his or her child constitutes a disposal of an asset for capital gains tax purposes. The first €1,270 of chargeable gains in any tax year is exempt from capital gains tax. Where the gains exceed that amount, capital gains tax will only be charged on the amount in excess of €1,270. The current rate of capital gains tax is 33%.
Where land has been owned by a person for a minimum period of 10 years and has been used by that person for farming throughout that period, retirement relief applies to a transfer of such land by a person, who is aged 55 or over, to his or her child. Where the person is aged between 55 and 65 years, there is no restriction on the amount of relief that is available. However, relief is capped at €3m where the person who transfers land to his or her child is aged 66 or over and the transfer occurs on or after 1 January 2014. If the land on which relief is granted is disposed of by the child within 6 years of the date of the transfer, the relief granted will be clawed back by way of an assessment on the child.
Stamp Duty
The transfer of agricultural land normally attracts a charge to stamp duty at the rate of 2% on the market value of the land transferred. A reduced rate of 1% applies in the case of a transfer, on or before 31 December 2014, where the transferee is a child of the transferor.
There is an exemption from stamp duty where the transferee is a young trained farmer. To qualify as a young trained farmer, the transferee must be under 35 years at the date of the transfer and must also be the holder of specified educational qualifications as set out in Section 81AA and Schedule 2, 2A and 2B of the Stamp Duties Consolidation Act 1999. This exemption applies where the transfer is executed on or before 31 December 2015. However, as the farmer's child mentioned by you does not have a "green certificate", it would appear that he would not be the holder of the necessary qualifications and therefore the transfer would not qualify for the young trained farmer exemption.
Capital Acquisitions Tax
The transfer of land by a person to his or her child also constitutes a gift to the child for Capital Acquisitions Tax purposes (CAT). CAT is the overall name for both Gift Tax and Inheritance Tax. For the purposes of CAT, the relationship between the person who provides the gift or inheritance (the disponer), and the person who receives the gift or inheritance (the beneficiary), determines the maximum tax-free threshold-known as the "Group Threshold". The Group Threshold applying to a gift or inheritance, received by a child from his or her parents, is the Group A threshold and, for 2014, this is €225,000. Any other gifts/inheritances that might have been received by the child from his or her parents since 5 December 1991 will also be taken into account when applying the threshold for the purposes of calculating the gift/inheritance tax.
CAT is charged on the excess value over €225,000 received by a child at the rate of 33%. Where a gift or inheritance consists of agricultural property, the market value of the agricultural property gifted may be reduced by 90% for CAT purposes provided certain conditions are met. The main conditions are that the beneficiary of the gift/inheritance must qualify as a "farmer" in order for agricultural relief to apply to the lands being transferred. A "farmer" is defined in the legislation as an individual whose gross property consists of at least 80% agricultural property, as defined, after receiving the gift or inheritance. Also, the beneficiary of the gift/inheritance must not sell the lands for a period of six years after receiving the gift/inheritance.
Where CGT and CAT arise on the transfer of lands, the CGT paid can be credited against the CAT liability arising provided the lands are not disposed of within 2 years of the acquisition. This ensures that the transfer of the lands is not subject to double taxation.
