Karen Walsh: No surprise that farmers looking to transfer or sell sites again
I am farming, and have one son and two daughters. The time has come to get my affairs in order.
My son is farming with me, and I wish to gift him the farm in my lifetime. However, I want to look after my daughters now, and would like to give them a site each now.
What is required? What are the taxes involved? What is your advice?
House price growth has been gathering pace since the middle of last year. A shortage of residential properties for sale, and an absence of new homes being constructed, have been major contributors to upward pressure on prices.
The quantity of properties to buy has declined seriously in the past 12 months, so it comes as no surprise that farmers are looking to transfer or sell sites again.
Taxes are the main issue to consider when deciding whether to transfer a site to a family member.
The three taxes are capital gains tax, gift tax (if the site is transferred during the owner’s lifetime) or inheritance tax (if transferred after death) and stamp duty.
Capital Gains Tax
The transfer of a site from a parent to a child is exempt from Capital Gains Tax, on the basis that the following conditions are satisfied:
* The site must be used for the construction of the principal primary residence of the child.
* The market value of the site does not exceed €500,000.
* The total area of the site does not exceed one acre.
* The house is occupied for at least three years prior to the site being sold by the child.
* A parent can only transfer one site to each child under this exemption.
Gift & Inheritance Tax
The rate of gift and inheritance tax since December, 2012, is 33%. No gift tax is payable on the first €3,000 of a gift in any calendar year.
The amount which can be received tax-free by a child is at present €225,000.
Stamp Duty
In the case of non-residential property, stamp duty is payable at a rate of 2% of the market value of the site.
Consanguinity relief has been abolished in relation to sites. On a death, there is no stamp duty payable.
Other things to bear in mind are that you and your daughters will need to be separately represented in the transaction.
Solicitors are prohibited from acting on both sides of any conveyancing transaction. It is now essential that both sides be independently advised, even though it involves a gift of land to a family member.
An engineer will need to be instructed to mark the site on a map, suitable to Land Registry mapping requirements.
If your daughters require a right of way to gain access to the site, or a wayleave to gain access to a well on your land etc, a Deed of Right of Way or Deed of Wayleave will also have to be drawn up and executed.
Farmers should also consider the impact that transferring part of the farm may have on issues such as the right of way to remaining farmland.
Any necessary rights of way should be registered on the land transfer folio.
This will avoid further legal costs in the future and possible difficulties between recipients of the lands.Such rights of way could include access to other parcels of land.
An auctioneer will need to be instructed to value the site for tax purposes.
Your solicitor will hold the title deeds to your property. If the property is mortgaged, your bank hold the title deeds.
If the property is mortgaged, it will be necessary to obtain the written consent of the bank to the transfer.
Anyone thinking about transferring a site should weigh up the decision. For those close to retiring age, it may well be a good time for a transfer, given the current valuation of sites.
