Capital Acquisitions Tax

Dubsey

Hi all,

I decided on this sub-forum as opposed to the taxation one.

My mother currently farms (in the loosest sense of the word) the home farm in Donegal - roughly 90 acres with home house ad outbuildings etc.

I am an only child and my father passed away in 1992. When this happened, both of our names (i.e. my name and my mother's) were added to the deeds as joint owners (or joint tenants, as opposed to tenants in common in legal speak). I am 99% sure that this is the case but am in the process of getting this confirmed by our current and useless solicitors.

I am working in Dublin with wife and family etc.

She is 70 and wont be able to carry on the way she has been for too much longer so we are doing a bit of succession planning.

The question I have is this:

When the day comes that the estate passes fully to me as the sole owner (likely to be upon her death - hopefully many years from now), in the eyes of the tax man, is this seen as being a capital acquisition and hence there is a tax liability question to be answered or not?

I am going to seek advice from an accountant on this but was hoping some of you may have gone through this already.

Many thanks,

D.

lakill Farm

Depending on other inheritances you have received and on my best estimates I would think you will have no tax liability (based only on the below information) and once you are eligible for agri relief and qualify on the 80% test. Read that part twice.

Threshold A currently e325,000 (can change but work with this amount) zero other inheritance from father or mother such as sites etc

90a probably average e5/6k. E540,000
Farmhouse e100,000
Total inheritance e640,000
Agri relief 90%

Threshold e325,000
Agri land -e64000
Remaining threshold group a of e261 (based on current figures)

Nil stamp duty (inheritance)
Nil CAT

Big issues for you

Other group A amounts you have received thus far in your lifetime
Value of land
Value of farmhouse
Value of other inheritance (not taken into account above)

Agricultural relief.
If you own a house in Dublin (you don’t say) and other personal wealth you could very easily miss the rules of 80% agricultural assets

If your not going to farm it for 5 plus years or lease it to a green cert holder you will suffer CAT agri relief clawback


Any questions post here or drop me a PM of private and I’ll steer you in the right direction as best I can

*Apologises if the text and figures are all over the place I had them lined up fairly correctly on phone when typing this up*

Dubsey wrote: »

Hi all,

I decided on this sub-forum as opposed to the taxation one.

My mother currently farms (in the loosest sense of the word) the home farm in Donegal - roughly 90 acres with home house ad outbuildings etc.

I am an only child and my father passed away in 1992. When this happened, both of our names (i.e. my name and my mother's) were added to the deeds as joint owners (or joint tenants, as opposed to tenants in common in legal speak). I am 99% sure that this is the case but am in the process of getting this confirmed by our current and useless solicitors.

I am working in Dublin with wife and family etc.

She is 70 and wont be able to carry on the way she has been for too much longer so we are doing a bit of succession planning.

The question I have is this:

When the day comes that the estate passes fully to me as the sole owner (likely to be upon her death - hopefully many years from now), in the eyes of the tax man, is this seen as being a capital acquisition and hence there is a tax liability question to be answered or not?

I am going to seek advice from an accountant on this but was hoping some of you may have gone through this already.

Many thanks,

D.

kowtow

Hi There

There are others here more qualified than me to answer but, disregarding for the moment the fact that you are already on the deeds (and that is something you will need to ask a specialist about) if it was a straightforward inheritance the CAT agricultural exemption would be what you are looking for.

That exemption reduces the market value of the asset for CAT purposes by 90% - ie. to a tenth of it's open market value. It applies to land, to a farmhouse of reasonable size in relation to the land it stands on (check that point), and to certain other agricultural assets.

The test you need to meet to use that exemption is (1) That more than 80% of your assets after inheritance are agricultural (2) That you are either (a) A trained farmer - i.e. have completed the usual green certs etc. or (b) an Active farmer - more than 50% of your time spent in farming or (c) that after inheritance you lease out the land for a certain period to an Active farmer.

These are not quite the same as the stamp duty reliefs and people often get them confused particularly as regards the green cert.

You will need to take specific advice as I said.

kowtow

lakill Farm wrote: »

If your not going to farm it for 5 plus years or lease it to a green cert holder you will suffer CAT agri relief clawback

You will know better than me but isn't it the case that you must least it to an Active farmer rather than - specifically - a green cert. holder. i.e. doesn't the tenant simply need to meet the criteria that the Landlord himself would not?

patsy_mccabe

Don't know about joint ownership, but you can qualify for either Agricultrual Relief or Business Relief. Generally you check if you qualify for the ag relief, if not you apply for business relief.
If you qualify, the value of the asset (farm) decreases by 90% for consideration of the threshold amount.

In a nutshell, you can inherit something like €3,500,000 tax free, but you have to hold onto the farm for 6 years, I think.

Have a look at the revenue site for the exact values.
https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-exemptions-and-reliefs/business-relief/index.aspx

lakill Farm

kowtow wrote: »

You will know better than me but isn't it the case that you must least it to an Active farmer rather than - specifically - a green cert. holder. i.e. doesn't the tenant simply need to meet the criteria that the Landlord himself would not?

Yes. I was sitting in a car park typing it up and keeping it fairly general.

lakill Farm

Ye currently threshold A (from a parent) is e325k
Or 3.25million if you qualify for agri relief

patsy_mccabe wrote: »

Don't know about joint ownership, but you can qualify for either Agricultrual Relief or Business Relief. Generally you check if you qualify for the ag relief, if not you apply for business relief.
If you qualify, the value of the asset (farm) decreases by 90% for consideration of the threshold amount.

In a nutshell, you can inherit something like €3,500,000 tax free, but you have to hold onto the farm for 6 years, I think.

Have a look at the revenue site for the exact values.
https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-exemptions-and-reliefs/business-relief/index.aspx

kowtow

lakill Farm wrote: »

Yes. I was sitting in a car park typing it up and keeping it fairly general.

Actually just read the FAQ and some interesting questions arise, IMO, where both husband and wife might inherit agricultural assets and, normally speaking, expect to be able to benefit from CAT relief.

Would be interested to hear experiences of this particularly where herd number is in wife, or husbands' name and the spouse farms the land, or where they farm in partnership for tax purposes.

I suspect it would often be the case that husband and wife are in partnership from a tax perspective, both have agricultural assets and wish to use CAT, but wife (for example) might not meet the active farmer test quite so easily because of off farm work even if herd number and/or some of the land belongs to her.

Any thoughts? Would one need to lease land to the other? (which would not be tax free as they are connected).

lakill Farm

Had one or 2 cases recently of it where both inherited land

Both have seperate CAT thresholds. So e325k her and e325 him

Normally rent it to the spouse for a nominal amount if one is farming and other working.

kowtow wrote: »

Actually just read the FAQ and some interesting questions arise, IMO, where both husband and wife might inherit agricultural assets and, normally speaking, expect to be able to benefit from CAT relief.

Would be interested to hear experiences of this particularly where herd number is in wife, or husbands' name and the spouse farms the land, or where they farm in partnership for tax purposes.

I suspect it would often be the case that husband and wife are in partnership from a tax perspective, both have agricultural assets and wish to use CAT, but wife (for example) might not meet the active farmer test quite so easily because of off farm work even if herd number and/or some of the land belongs to her.

Any thoughts? Would one need to lease land to the other? (which would not be tax free as they are connected).

Dubsey

Thanks for all the responses.

Yes, bought a house with my wife 5-6 years ago for €417,000 in Dublin that has risen in value since so the 80% threshold is what I would need to look out for.

Going to get some professional advice based on the current tax rules.

Thanks again,

D.

Dubsey

Hi,

Following on from the above.

Would anyone have a good recommendation for an Accountant in the East Donegal region who could advise us on this?

D.

lakill Farm

Why does it have to be east Donegal? Sure its a small country and email will sort most of it.

It’s very simple when all the facts are available.

Dubsey wrote: »

Hi,

Following on from the above.

Would anyone have a good recommendation for an Accountant in the East Donegal region who could advise us on this?

D.

Bass Reeves

lakill Farm wrote: »

Why does it have to be east Donegal? Sure its a small country and email will sort most of it.

It’s very simple when all the facts are available.


e]

On email it amazing the amount of business's that still post out bills for regular accounts rather than emailing them. Cost must be horrendous. Take a vet practice that has maybe 7-800 accounts and is mailing over 500 bills a month. This adds up to 6k/ year. If you reduced it by over 80% it would add about 5k to the bottom line.

Grueller

Bass Reeves wrote: »

On email it amazing the amount of business's that still post out bills for regular accounts rather than emailing them. Cost must be horrendous. Take a vet practice that has maybe 7-800 accounts and is mailing over 500 bills a month. This adds up to 6k/ year. If you reduced it by over 80% it would add about 5k to the bottom line.

Our vet changed that and posts bills only every 3 months. He reckons bills still get paid as quick and he is about €4000 better off per annum. Economies of scale I suppose.

lakill Farm

Bass Reeves wrote: »

On email it amazing the amount of business's that still post out bills for regular accounts rather than emailing them. Cost must be horrendous. Take a vet practice that has maybe 7-800 accounts and is mailing over 500 bills a month. This adds up to 6k/ year. If you reduced it by over 80% it would add about 5k to the bottom line.

Franking machines leave the post a bit cheaper. But yes even with reduced post we here would be using 1200/1500 stamps and 50% of our post goes to Revenue which is freepost

probably spending €2500 on couriers easy

Dubsey

Hi,

The reason I'd like it to be in Donegal is that I'd like a face-face meeting with the accountant and my Mother (who lives up there).

I'm all for paperless etc. but she has been difficult to convince that any sort of planning needs to be done so a proper kick-off meeting is needed.

D.

lakill Farm

Dubsey wrote: »

Hi,

The reason I'd like it to be in Donegal is that I'd like a face-face meeting with the accountant and my Mother (who lives up there).

I'm all for paperless etc. but she has been difficult to convince that any sort of planning needs to be done so a proper kick-off meeting is needed.

D.

I agree on that aspect of the service .