agricultural relief

teach nua

I have seen a number of comments in posts on various forums about people being advised by tax advisors/accountants to reduce their personal assets such as homes and saving by transferring these to spouses in order to meet the 80% test for agricultural relief for capital acquisition tax.

Does anyone know if this is being tax efficient and that revenue would not see it tax evasion, assuming you were avoiding paying CAT by getting the relief?

I asked revenue this question and one office told me it is fine, that the test is just based on your personal assets on the day of valuation.

Another revenue office told me they did not know and referred me to their acts on tax avoidance without specifically telling me it was tax avoidance They asked me to write in with the question. They said it would take about 6 weeks before I would get a reply due to backlogs.

In revenue's 'guide to farming taxation measures in finance act 2014' section 3.6 in relation to CAT and agricultural relief refers to active farmers and inheritance tax, which can also be subject to agricultural relief. There is a sentence here which reads 'the existing 80% asset farmer test applies at the valuation date and not the date of inheritance and as such gives a window of opportunity, time wise, for a beneficiary to arrange his or her affairs so as to meet that 80% test' .

Could 'arranging your affairs' include reducing your personal assets to meet the 80% test?

One of the conditions of the relief is that the land must be leased for a period of not less than 6 years to a qualified farmer.
Would renting on a year to year basis to a qualified farmer fulfill this condition?
(revenue could not answer this one for me either)

If anyone could share their experiences it would be great as I imagine several family farm transfers go on everyday.

I will be seeking professional advice but I think my questions are fairly common

thanks

patsy_mccabe

The way it was explained to me recently by a tax expert is - 'The revenue is not in the business of breaking up viable businesses'. Makes sense when you think about it. If you continue to run the business, you will be paying taxes to them. They don't want to kill the golden goose.
Remember if you don't qualify for Agricultural Relief, you can apply for Business Relief, say in the case of a non-trained (Green Cert) farmer.
I was mentioned to me also, that it is common for people to transfer assets to the their spouses. How strong is your marriage?:D

I would strongly suggest you talk to a tax expert.;)

Username John

I think it's perfectly legal and above board to transfer assets to your spouse to meet the 80% rule... The moving of private assets to see how you're left with regards to a business makes sense to me, don't see anything wrong with it...

The rental rule
EDIT : where is this from? Is this when you are letting out the farm to qualify to let it tax free?
Or is some condition around the inheriting of the farm?

Justjens

By the sounds of it Revenue are encouraging you, by allowing you time to get your house in order, to qualify for the 80% rule, so I would see nothing wrong with transferring assets if you have the time and a safe place to transfer them too!!

A five year lease minimum is now required to a qualified farmer (considered a long term lease) and they cannot be related to you (income is also tax free!). Five single one year leases will not count, and you will only find that out a year or two down the road when they send you a demand for additional CAT, plus interest and charges (and you'll have to pay income tax on the rental income).