Sharing Farm Inheritance

sportsfan90

Hi All - just a few questions for a colleague of mine who's in line to inherit half a farm and would like some understanding of the requirements before the conversation is had with his parents & sibling.

Their situation is 2 siblings, neither of which have enough interest to take over the farm full time. Both are around 30 yrs old, and the parents are beyond retirement age if that matters. The farm will likely be leased out when the time comes.

When the farm is being handed over, is it more complicated when a farm is being left to more than one person?

As far as I know neither have done the Green Cert - is this a requirement or financially advantageous (for at least one or both siblings) to have if it's to be leased out?

Would the length of the lease make any difference?

Are there any tax implications they should be aware of regarding inheritance etc.

Thanks.

Mooooo

Needs to talk to an accountant along with family to trash everything out. A lot depends on their existing non agri assets and value, if done after they turn 35 stamp duty will be up on 7.5%, etc. A lot of factors really. Prob worthwhile for both of them to do the green cert.

lakill Farm

I think a bigger issue would be fair scheme with nursing homes.

Stamp duty can still be zero without green certs.

The world over

Surely stamp duty would be 1% at least? i.e. Consanguinity Relief

893bet

The world over wrote: »

Surely stamp duty would be 1% at least? i.e. Consanguinity Relief

Depends on other assets. If the farm is being split it will make it more difficult for both parties meet the 80 percent rule.

The world over

Stamp Duty has nothing to do with 80% rule. The 80% rule relates to whether claimant qualifies for Agricultural Relief i.e. 80% of total value of assets must be farming assets. If the farm is of a smaller size Agricultural Relief might not be needed as the Group A Gift/Inheritance Tax threshold might cover off value of farm from the parents. More info is needed.
In my view I can't see how stamp duty is avoided unless claimant has green cert and under 35 or qualifies for reduced level of stamp duty (1%) i.e Consanguinity Relief but there are conditions to meet this.

893bet

The world over wrote: »

Stamp Duty has nothing to do with 80% rule. The 80% rule relates to whether claimant qualifies for Agricultural Relief i.e. 80% of total value of assets must be farming assets. If the farm is of a smaller size Agricultural Relief might not be needed as the Group A Gift/Inheritance Tax threshold might cover off value of farm from the parents. More info is needed.
In my view I can't see how stamp duty is avoided unless claimant has green cert and under 35 or qualifies for reduced level of stamp duty (1%) i.e Consanguinity Relief but there are conditions to meet this.

Sorry yes you are correct. Got mixed up between the two.

What’s the approx farm value OP?

sportsfan90

893bet wrote: »

Sorry yes you are correct. Got mixed up between the two.

What’s the approx farm value OP?

I’m not familiar with farm values - it’s in the south of the country with maybe 70 acres of good land with decent enough sheds, slatted floors, silage pits etc.

893bet

sportsfan90 wrote: »

I’m not familiar with farm values - it’s in the south of the country with maybe 70 acres of good land with decent enough sheds, slatted floors, silage pits etc.

At that size the it will be close to the threshold (likely above...) I would assume which is 335k per head. So total value of 670k between ye. If there machinery and stock and entitlement etc then they will also need to be included.

Anything over the threshold is charged at 33% tax....so work carefully with the valuer to ensure its is correct...

sportsfan90

893bet wrote: »

At that size the it will be close to the threshold (likely above...) I would assume which is 335k per head. So total value of 670k between ye. If there machinery and stock and entitlement etc then they will also need to be included.

Anything over the threshold is charged at 33% tax....so work carefully with the valuer to ensure its is correct...

Can you explain this part to me please, if the value was say 700k and the farm was being inherited by one son only, as far as I know there wouldn’t be a massive tax bill for anything over the 335k threshold, or am I mistaken in that? Why then would it apply if it’s being left to both of them?

Thanks for the replies so far everyone and apologies if my questions have obvious answers.

memorystick

Now is the time to divide and not pay extra monies and have your own plans.

It's important for all involved to go to a proper tax consultant (not accountant/book keeper) familiar with agriculture before anything is done. A good solicitor familiar with AG and an AG advisor who can do more than scratch his arse and cash a paycheck will be needed to handle transfer and whatever is to be done with entitlements. The Stamping Office in Revenue are very helpful too.

This isn't a job to get advice on the cheap.

893bet

sportsfan90 wrote: »

Can you explain this part to me please, if the value was say 700k and the farm was being inherited by one son only, as far as I know there wouldn’t be a massive tax bill for anything over the 335k threshold, or am I mistaken in that? Why then would it apply if it’s being left to both of them?

Thanks for the replies so far everyone and apologies if my questions have obvious answers.

If it was one person inheriting the 700 k they would be paying 33% on the balance above 335k. So over 100k in tax unless they can qualify for agricultural relief.

You qualify for agri relief if you are willing to
1) farm the land after inheritance (for 6 year I think) or rent it to an active farmer
2) meet the 80 percent test. So the value of the farm when added to your other assets. The farm has to be 80 percent of the total. So if you had assets worth 200k and the farm was worth 700 you are only at 77 percent and would have a large tax bill. If you only had 150k assets original you would met it at 82 percent.

Hence if ye are splitting it it may be more difficult to meet then 80 percent rule (if you need it, but you may not need it if your half is under the threshold or close it it).

Info below

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-reliefs/agricultural-relief/what-are-the-conditions-for-agricultural-relief.aspx

893bet

I only went threw it last month. A bit of a mind field all round.

Bass Reeves

OP
There are two distinct tax elements to the issue. Stamp and inheritance.

You stated that both are in around 30.if they inherit before 35 stamp duty is avoidable if they have a green cert. I presume both are fairly well educated so it possible they can do the short part-time green cert. Some 3rd level courses automatically qualify you for a GC but they are few and related to agri and food qualifications.
SD is 7.5% so if valuing the farm at 700k the bill would be 52.5k or 26k each approx.

Inheritance tax us the second issue. While at present with this inheritance the tax element is low as it is possible to value farm at or below there two thresholds combined. However if they are going to inherit again from there parents or intending selling in the future looking at consanity relief may be necessary. If they have assets or serious savings it is nearly impossible to qualify as 20% is a low threshold. However the value of farms is very variable and values of good land can range from 7k-20k+ if in a dairy region or development potential. As they intend to.lease this will solve the 6 year rule. Just to give a indication of how valuing can change the outcome.

Land valued at 10k/acre or 700k 20%rules allows them to have 140k in assets

Land valued at 20k/acre or 1.4mill 20%rules allows them to have 280k in assets.

But values have to be fairly realistic as revenue will look at it in detail. They really need to talk to a good agri account/consultant.

There is also a the option of leaving farmning parents name and inheriting through a will. This about stamp duty but risks associated with CAT are stillin play. The risk associated with nursing home fees is also in play. Each parents can gift children 3k/each each, this would reduce liability of tax on lease income if going down that route

893bet

Stamp duty may be 7.5 percent, 1 percent or 0 percent depending on what actions you take OP.

sportsfan90

Thanks everyone for the responses, some good info there to get started with.

sportsfan90

OP here again, there's one question nobody I've asked seems to have an answer to but someone here might know.

When calculating the value of a persons non-agricultural assets for the 80% rule, does money invested in a pension count as an asset?
Or would that not be counted the same way as a persons house, money in the bank, car etc all would?