Tuesday, 25 June 2013

Ceisteanna (196)

Michael Healy-Rae


196. Deputy Michael Healy-Rae asked the Minister for Finance the position regarding tax liability in respect of persons entering farming; and if he will make a statement on the matter. [30264/13]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

I understand that the Deputy’s question relates to gift and inheritance tax regarding farms. The Capital Acquisitions Tax (CAT) code includes gift tax, inheritance tax and discretionary trust tax.

The tax is charged on the amount gifted to, or inherited by, the donee (the person receiving the gift/inheritance). There is a tax-free threshold (referred to as a ‘group threshold’), based on the relationship between the disponer (the person making the gift/leaving the inheritance) and the donee (the beneficiary). Previous gifts/inheritances since 1991 from other disponers in the relevant group are counted when calculating the taxable amount over the threshold. The balance of the gift/inheritance above the threshold is taxable, currently at a single rate of 33%.

The Group A tax-free threshold is €225,000; the Group B tax-free threshold is €30,150; and the Group C tax-free threshold is €15,075.

Group A relates to gifts and inheritances taken by children from their parents. Group B covers gifts and inheritances between relatives, for example, brothers and sisters, grandparents to grandchildren, uncles and aunts to nieces and nephews. Finally, Group C deals with gifts and inheritances between all other persons.

There is a CAT agricultural relief. In order to qualify for this relief an individual receiving a gift or inheritance of agricultural property must qualify as a farmer. For the purpose of the relief a farmer is an individual at least 80% of whose assets constitute agricultural property.

CAT agricultural relief takes the form of a reduction in the market value of the agricultural property - currently by 90% - for the purposes of establishing the Group thresholds and determining whether or not a CAT liability arises on a transfer. This relief has increased over the years from an original reduction of 50% when CAT was introduced in 1975. The relief will be withdrawn if the agricultural property is sold or compulsorily acquired within six years of or, in certain circumstances, ten years of the gift or inheritance unless the proceeds are reinvested in other agricultural property.

The overall position as regards CAT is therefore, that parents can transfer a family farm with a market value of up to €2,250,000 to a child without any charge to CAT arising on the transfer, (assuming the child qualifies as a “farmer” under the 80% assets test) as the market value of the agricultural lands transferred would be reduced by 90% to €225,000 – this is the Group A threshold for transfers from parent to child for CAT purposes – to leave no CAT payable. (This assumes that the child has received no prior gifts or inheritances from his or her parents).

The fact that farms with a market value of up to €2,250,000 can be transferred to a child without any charge to CAT arising reflects the Governments recognition of the central importance of agriculture to the overall economy and to the sustaining of rural communities.