Agricultural relief to be examined ahead of Budget 2027

Current qualifiers for agricultural relief require individuals to pass two tests, ‘the farmer test’ and ‘the active farmer test’

Agricultural relief has been proposed for examination ahead of Budget 2027.

The recent publication of the Tax Strategy Group papers ahead of Budget 2027 has listed agricultural relief as an area to be examined.

Agricultural relief is one of the major tax reliefs available for farming families on gifts and inheritances, reducing the taxable value of agricultural land and other qualifying agricultural assets by 90%.

Current qualifiers for agricultural relief require individuals involved to pass two tests, ‘the farmer test’ and ‘the active farmer test’.

The farmer test requires, on the day of receiving the farm, at least 80% of the total assets of the person receiving the land must consist of agricultural assets (including the agricultural assets being received).

The active farmer test consists of three conditions where the recipient of the land must meet one for six years:

• Farm the agricultural assets on a commercial basis with a view to making a profit and spend at least 50% of their normal working time farming. Revenue generally accepts that this condition is met where the person farms for at least 20 hours per week, averaged over the year.
• Farm the agricultural assets on a commercial basis with a view to making a profit and hold a recognised agricultural qualification, such as a Green Certificate.
• Lease substantially (75% of the value) of the agricultural assets to someone who meets either of the above tests.

In Budget 2025, two major changes to the farmer's eligibility criteria for the relief were proposed. One change would allow the active farmer to test-apply for both the person giving up the land and the person receiving it. 

This would mean before the transfer or death, the donor or deceased would have had to farm the land, or lease it to an active farmer, for the previous six years.

The second change would see the removal of relief where cash is gifted or inherited with the specific requirement that it be used to buy land.

The Tax Strategy Group papers published by the Department of Finance have now proposed three alternatives:

• Proceed with the 2025 proposal to deal with tax planning schemes using the relief, which would be accepting that smaller farmers would be unable to meet the new requirements restricting relief.
• Repeal the revised provisions from tax legislation as part of the Finance Bill process, accepting that the impact on the farming sector would be too significant to justify introducing such a measure.
• Develop a new revised relief to address tax planning, by considering a model similar to the UK model which introduced a cap on agricultural relief.

Speaking on the publication, head of tax at Irish Farm Accounts Co-operative Society Limited (ifac), Marty Murphy said: “When farm families are already trying to manage falling crop prices, unpredictable weather, and high diesel bills, throwing tax limbo onto the pile only creates unnecessary worry for anyone trying to plan the future of their farm.” 

Mr Murphy highlighted that on September 16, 2025, the Commission on Generational Renewal in Farming published its report. One of the areas covered was “taxation supports”, where they outlined that the proposed changes should remain available to farm families to facilitate succession and intergenerational transfer of farms.

The Commission also said in their report that “any changes which result in triggering significant tax liabilities for successors will not only hamper generational renewal, but they will also seriously threaten the ongoing economic viability of Irish farms”.