Dáil Éireann Debate, Thursday - 8 September 2022
386. Deputy Cathal Crowe asked the Minister for Finance if he will waive the taxation treatment that currently applies when portions of land are sold or leased to the ESB for the purposes of installing pylons in order to provide an incentive to farmers and landowners, owing to the requirement for Ireland to rapidly upgrade and enhance its national electricity grid infrastructure; and if he will make a statement on the matter. [43163/22]
Amharc ar fhreagraIn general, Capital Gains Tax (CGT) is chargeable on a gain arising on the disposal of an asset, including land sold for the purpose of installing pylons, at the rate of 33%. The first €1,270 of chargeable gains of an individual in any year are exempt from CGT.
I am informed by Revenue that the chargeable gain arising on the disposal of land is the difference between the sale price (net of certain incidental costs of sale) and the base cost, being the cost incurred when acquiring the land or, in certain circumstances, the market value of the land at the date of acquisition.
Should the land owner have incurred expenditure to enhance the land during their period of ownership, this cost may also be deducted in calculating the chargeable gain as long as it is reflected in the state or nature of the land at the time of disposal. Where only part of an asset, including land, is disposed of, only a portion of the base cost and, if relevant, enhancement expenditure is deductible in computing a chargeable gain on the part disposal.
The Deputy’s question relates specifically to the installation of pylons for the transmission of electricity. In this context, for the purposes of CGT, there is a disposal where any capital sum is received as consideration for the use or exploitation of assets, e.g. premiums for leases over land or lump sum payments to landowners or farmers for the granting of easements or wayleaves, whether in perpetuity or for a term of years.
Should the land in question be in use for the purpose of a trade, including farming, at the time of disposal, relief from CGT on gains arising on the disposal may be available by way of retirement relief (sections 598 and 599, Taxes Consolidation Act (TCA) 1997) and/or revised entrepreneur relief (section 597A TCA 1997), should the landowner fulfil the conditions required to claim such reliefs.
In relation to Income tax, section 664 TCA 1997 provides for a tax exemption in respect of income received by an individual from certain long-term leases of farmland. Relief under section 664 applies to lessors who enter leases of farmland with farmers. To qualify for relief, the leased farmland must be used by the lessee wholly or mainly for husbandry and for the purposes of farming.
A lease of land by an energy company for the purpose of the installation of pylons will not be regarded as related to the trade of farming for the purpose of section 664 TCA 1997. Therefore, the rental income received from an energy company is chargeable to tax under Case V of Schedule D, at the person’s marginal tax rate.
The facts and circumstances of each disponer at the time of each disposal will determine the CGT and / or income tax due when portions of land are sold or leased for the purpose of installing pylons.
