I am advised by the Revenue Commissioners that gains in respect of land acquired by way of compulsory purchase order are chargeable to capital gains tax (CGT) at the rate of 33%.
However, as I previously advised, a revised relief for entrepreneurs has been introduced in section 33 of Finance Bill 2015, which was published on 22 October. The revised relief provides that a reduced rate of CGT of 20% will apply in respect of chargeable gains on disposals of chargeable business assets made by an individual on or after 1 January 2016 up to a lifetime limit of €1 million.
On the basis of the Finance Bill provision as published, a farmer whose land has been compulsorily acquired will qualify for the reduced rate relief of 20% if the following conditions are met:
1. The compensation payment under the compulsory purchase order is received on or after 1 January 2016;
2. The land in question was owned by the individual for a minimum period of 3 years prior to the compulsory acquisition; and
3. The land in question was used by the individual for the purposes of a farming business prior to the compulsory acquisition.
It should be noted that the reduced rate of 20% will apply only to the first €1 million of chargeable gains accruing to the individual on the disposal of chargeable business assets on or after 1 January 2016.