Finance Act will end threat of 6% duty on farm transfers
The confidence and supply arrangement, that agreement between Fianna Fail and Fine Gael which effectively sees Fianna Fail support the Fine Gael minority Government, was tested to the limit in
recent weeks, culminating in the resignation of Tanaiste and Minister for Business, Enterprise and Innovation Frances Fitzgerald.
From a tax perspective, had the Government failed, the Budget of last October would stall, with the Finance Bill
unable to proceed through the Dail and Seanad.
For PAYE workers, the
increase in the standard rate tax band, and the reductions in the Universal Social Charge would not have taken effect from January 1, meaning the take home pay for January would not benefit from the cuts in taxes.
From a farming perspective, the rates of stamp duty on land are in a state of flux.
Before the Budget day
(October 10), stamp duty
applied at a rate of 2% on
commercial land sales
between unconnected parties.
A reduced rate of 1%
applied on the sale or transfer of land between connected parties, due to consanguinity relief.
This relief only applies to land transfers, and only
between certain relatives, such as lineal decendants and lineal ancestors, aunt, uncle, nephew, niece, brother and sister.
The relief was of particular importance in recent years in the case of land transfers to children by parents, where the child did not have a “Green Cert”.
For transfers up to the date of the passing of the Finance Act 2017 (expected to occur within the next two weeks), the transferor must be under 67 years of age at the date they transfer the land.
After the Finance Act 2017 is passed, this requirement will be removed for an
expected period of three years.
This change in rules will
facilitate those parents who are currently aged over 67, and have been unable to avail of consanguinity relief
because of age restriction.
The age restriction was brought into effect from
January 1, 2016, and it was proposed at the time that
consanguinity relief could have been phased out entirely from January 1, 2018.
This Government’s decision to increase the stamp duty rate to 6% on commercial property (with the exception of certain development land), coupled with the potential phase out of consanguinity
relief, would have meant that the stamp duty applicable on the transfer of farms other than to young trained farmers would have cost an incredibly high rate of 6%.
This level of taxation on the transfer of farms could not have been countenanced; hence consanguinity relief has been extended for a further three years, with the special rate of 1% applicable for transfers after January 1, 2017.
So the increase in stamp duty rates is now more
focused on commercial properties (shops, retail units, etc) and land purchases by
unconnected parties.
In order to qualify for the special rate, in addition to the requirements to be of a certain class of blood relative, the transferee must farm the land for at least six years, or lease it for at least six years to someone who will farm it.
If you are farming the land, you must:
n hold a specified qualification or obtain it within a period of four years from the date you get the land
n or spend at least 50% of your time farming land
(including this land transfer).
n if, instead of farming the land yourself, you lease it to someone else to farm, that person must equally either hold a specified qualification or obtain it within a period of four years from the date you got the land
n or spend at least 50% of their time farming land (including this land transfer).
In the case of inter-family transfers occurring between Budget day ( October 10) and the date of the passing of the Finance Act, special care should be taken to prevent
unnecessary stamp duty at 6% applying, where a rate of 1% will apply after the
Finance Act is passed.
Individuals should obtain professional advice relevant to their own circumstances.
