Farm Transfers

The transfer of a family farm to younger generations is a big decision for any farmer and the farmer should speak with their solicitor in advance of any proposed transfer to see what options are available and find the best solutions for you. Of particular importance for the farmer when considering a transfer of the farm is at all times to ensure that they have sufficient income for the future for themselves and their family. Other issues to consider would be the transfer of the farm entitlements such as single farm payment, reps, milk quota etc and of course any taxes that may fall due.

There are three taxes that have to be considered in the transfer of a farm :-

1. Capital Gains Tax (CGT) – on the parent transferring the farm;
2. Capital Acquisitions Tax (CAT/Gift/Inheritance Tax) – on the child receiving the farm; and
3. Stamp Duty – again, on the child receiving the farm.

Capital Gains Tax (CGT) is a tax charged on the capital gain (a profit) made on the disposal of any asset. It is payable by the person making the disposal not on the person receiving the property. The gain/profit is the difference between the price you paid for the property and the price you sold it for. In the context of farming where a farm passes through the generations, the gain/profit in this situation will be the difference in the value of the farm when you received it and the value of the farm when you are transferring same.

The current rate of Capital Gains Tax (CGT) is 33%. We have seen a significant increase in the rates over the years.

Disposal of a farm to a child: 

At the moment full relief from CGT is available where an individual aged 55 or over, gifts a family farm, regardless of the value of the assets being transferred.

The CGT only becomes payable in circumstances where the child disposes of the assets within six years of the gift. In this situation the relief is withdrawn and in effect, the tax which would have been charged on the parent without the relief is charged on the child together with CGT on any gain accruing to the child’s on the disposal of the asset.

The reference to child above includes:

• an adopted child;
• child of a deceased child;
• a nephew or niece of the individual provided certain conditions are complied with; and
• a foster child provided certain conditions are complied with.

Disposal of a farm other than to a child.

Prior to Budget 2012, relief was granted from CGT on disposals made by individuals aged 55 or over of qualifying business or agricultural assets to persons outside of the family where the consideration was less than €750,000. Budget 2012 has reduced this to €500,000 for disposals by individuals aged 66 or over after 31 December 2013.

The current rate of Capital Acquisitions Tax is 33%. Similarly there has been a significant increase in the rates over recent years. In addition that has been a significant reduction in the Group Tax free threshold applicable to gifts from parents to children. The current tax free threshold is €280,000. Current reliefs from CAT on the transfer of a farm include Business Relief, Agricultural relief and favourite nephew/niece relief, which reduces the taxable value of the chargeable business assets by 90%. Clink on the link to your right for further information on theses reliefs. Budget 2012 made no changes to theses reliefs, but you should keep updated on this relief and any restrictions that may be introduced in the future as these are significant relief. 

A rate of stamp duty of 2% now applies to non-residential property from 7 December 2012 and a 1% stamp duty rate now applies to residential property on value up to €1,000,000 and a 2% rate thereafter. If your child qualifies as a young trained farmer they will be exempt from stamp duty.