Vol. 488 No. 1
83 Mr. Penrose asked the Minister for Finance if he will ensure that income from a farm land lease entered into between related persons, for the purposes of the early retirement scheme, will be exempt from income tax; and if he will make a statement on the matter. [5155/98]
Under section 10 of the 1985 Finance Act (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.
