Consultant warns there may be higher tax on inherited farm land

INHERITED farm land valued at €1m could cost up to €70,000 in tax if hinted increases occur, said a senior IFAC tax consultant.

Declan McEvoy, speaking at a seminar on farm inheritance on Wednesday, cited the example of “a house worth €200,000 with farm assets of €800,000.” Assuming agricultural relief goes to 60%, this would result in a tax liability on the farm transfer on gift tax of approximately €45,000. In the 2011 budget, the Government reduced the property duty to 1% on the first €1m and 2% on anything above that. If the Government goes a similar route in farming, that would result in a further €25,000 in tax. The Commission on Taxation has made two recommendations on farming that could come into effect in the next budget:

- A reduction in agricultural relief from 90% to 75%.

- The abolition of agricultural relief, which would, instead, be merged with a new form of business relief.

McEvoy said: “this is the year that all the reliefs are available, so if people are considering transferring their farms, now is the time to look at it seriously.”

The possibility of these increases means many farmers fearful of the tax change could rush to transfer their farms this year.

Anne Keohane, Cork IFA chairwoman and west Cork farmer, said people need to think it through. “People are nervous ... We’re fearful that they might rush out and transfer their farms ... But you can’t just do that to avoid taxes. People might not be ready.

At the meeting, held in the Oriel Hotel in Ballincollig, 100 farmers discussed the issue.

Keohane said that people had a misconception about ‘rich farmers’. “You’re not selling the land, you get a loan of the land when you inherit it. People will have to sell parts of the land to be able to afford it.”

Only 7% of Irish farmers are under the age of 35, and if the hinted tax increases come into play, this may decrease.

Some farmers will have to wait to inherit land until their parents die, to avoid the tax.

The Harvest 2020 report outlines the key actions needed to ensure the success of the agriculture sector.

The report states the Department of Agriculture should “target all future schemes and supports, which have limited funding, at those producers with best potential for growth and competitiveness, and in particular at younger farmers with relevant qualifications and sound business plans.”

It also states the department should work with a view to “maintaining current tax/policy incentives to encourage long-term development of the sector, including long-term land leasing, agricultural relief, retirement reliefs, stamp duty and stocking reliefs.”

If the tax increase is implemented, it’s unlikely these goals will be achieved.

Clare O’Keeffe works for Succession Ireland, a mediation service that facilitates discussions around the transfer of assets from one generation to the next.

O’Keeffe spoke at the meeting to encourage people to talk to each other before making the decision to transfer.

“Each farm is as unique as the people who are farming it ... Talk to your own family members about what you intend to do, your hopes, fears, concerns and the options available,” she said.

“The implications of the financial burden which will be attached to a transfer really have to be considered.”