Agricultural Relief - CAT 5

• Introduction
• What is Agricultural Relief?
• What is ‘Agricultural Property’?
• Eligibility for Business Relief
• What is a ‘Farmer’?
• What is the extent of the relief?
• How does the relief affect deductions?
• How is the relief obtained?
• Can the relief be withdrawn or clawed back?
• Historical Relief - Gifts
• Historical Relief - Inheritances
• Further information

Introduction

This booklet is a short guide to Agricultural Relief. It sets out, in question and answer format, the main features, conditions and eligibility criteria that apply. The information in the booklet relates to gifts or inheritances of agricultural property taken on or after 2nd February 2006. (For historical rates of relief which apply prior to 2nd February 2006, see Historic Relief). If you need further information you can contact our Taxpayer Information Service at the address and telephone number below.

What is Agricultural Relief?

Agricultural Relief has been available for gift and inheritance tax since the introduction of Capital Acquisitions Tax in 1976. The relief has been increased significantly in recent years.

The relief operates by reducing the market value of ‘agricultural property’ * by 90%, so that gift or inheritance tax is calculated on an amount - known as the ‘agricultural value’ - which is substantially less than the market value. In general, the relief applies provided the beneficiary qualifies as a ‘farmer’ *.

* These terms are explained below.

What is ‘Agricultural Property’?

For Gifts and Inheritances taken on or after 20th November, 2008 ‘Agricultural property’ means:

• agricultural land, pasture and woodland situated in a Member State of the European Union*;
• crops, trees and underwood growing thereon;
• houses and other farm buildings appropriate to the property; and
• livestock, bloodstock and farm machinery thereon.
• A payment entitlement (within the meaning of Council Regulation (EU) No. 1782/2003 of 29 September 2003)

* For Gifts and Inheritances taken prior to 20th November, 2008 the definition of Agricultural Property included land, pasture and woodland situated in the State only.

To Qualify for the relief the gift or inheritance must consist of agricultural property both at the date of the gift or inheritance and at the Valuation Date. The Valuation Date is the date at which the property is valued for gift/ inheritance tax purposes.

Exceptionally, however, the relief is applicable to the whole or part of a gift or inheritance notwithstanding that that whole or part did not strictly consist of agricultural property until after the date of the gift or inheritance:

• where an individual receives a benefit on condition that it is invested in whole or part in agricultural property and the condition is fully complied with inside two years after the date of the gift or inheritance; and
• where, in the course of administration, agricultural property is appropriated to satisfy in whole or in part a benefit under a will or intestacy and that agricultural property was subject to the will or intestacy at the date of the inheritance.

Shares in a company deriving their value from agricultural property do not qualify for agricultural relief but may qualify for business relief.

Eligibility for Business Relief

Agricultural assets not qualifying for agricultural relief may qualify for business relief. (For further information see Business Relief Leaflet - (CAT 4).

What is a ‘Farmer’?

To qualify for agricultural relief, the person receiving the gift or inheritance must be a ‘farmer’ at the Valuation Date.

For the purposes of the relief, a ‘farmer’ means: an individual in respect of whom at least 80% of his or her assets, after taking a gift or inheritance, consist of agricultural property on the valuation date of the gift or the inheritance.

The ‘80%’ test does not apply in the case of agricultural property consisting of trees and underwood.

The following example illustrates how the ‘farmer’ test works.

What is the Extent of the Relief?

For gifts and inheritances of agricultural property the relief is calculated by reducing the market value of the property by a flat rate of 90%.

Calculating the relief is straightforward as the following example illustrates.

How Does the Relief Affect Deductions?

Given that the full market value of the agricultural property is reduced by 90% in order to arrive at the agricultural value, any liabilities, costs and expenses properly payable out of the property and any consideration paid for the property must be similarly scaled down before being deducted from the agricultural value. The following example illustrates the scaling down of expenses and consideration.

How is the Relief Obtained?

An Agricultural Relief Claim must be made online by filing an IT38 (Inheritance Tax/Gift Tax Return form) through ROS, Revenue’s online service.

Can the Relief Be Withdrawn or Clawed Back?

Yes. There are a number of circumstances in which the relief can be withdrawn or partially clawed back.

• If the property is sold:
  • In general, the relief is withdrawn where the agricultural property is sold (or compulsorily acquired) within six years of the date of the gift or inheritance and is not replaced within one year of the sale of or within six years of the compulsorily acquisition by other agricultural property.
  • The withdrawal, or partial clawback, of the relief does not apply in relation to the sale of crops or timber, or where the beneficiary dies before the sale or compulsory acquisition
  • Where land which qualified for agricultural property is disposed of in whole or in part, by the donee or successor, in the period commencing 6 years after the date of the gift or inheritance and ending 10 years after that date, the relief granted will be clawed back in respect of the development value of that land at the valuation date of the gift or inheritance.
• If a residency requirement is not met:
  • In the case of a gift or inheritance taken on or before 7 February 2012 the relief is withdrawn unless the individual in receipt of the benefit is resident in the State for all of the three tax years immediately following the tax year in which the Valuation Date falls.
  • The Finance Act of 2012 removes the condition that an individual must be resident in the State for three years after the date of the inheritance. This only applies to gifts or inheritances taken on or after 8 February 2012.

Historical Relief - Gifts

Agricultural Relief - Rates, Limits and ‘Farmer’ Percentage Tests

Note: Each of the dates given refer to the date of the Gift/Inheritance and not the Valuation Date (which may be different)

‘Farmer’ Percentage Test

• Up to 28/5/91 - 75%
• From 29/5/91 - 80%

Reduction in Market Value

• Lands and Buildings
  • Up to 31/3/80 - 50% subject to maximum relief of €126,974
  • From 1/4/80 to 31/3/82 - 50% subject to max of €190,461
  • From 1/4/82 to 29/1/91 - 50% subject to max of €253,948
  • From 30/1/91 to 16/6/93 - 55% subject to max of €253,948
  • From 17/6/93 to 10/4/94 - 75% subject to max of €317,435
  • From 11/4/94 to 7/2/95 - 30% without restriction plus
  • 50% subject to max of € 190,461
  • From 8/2/95 to 22/1/96 - 50% without restriction plus
  • 30% subject to max of € 114,276
  • From 23/1/96 to 22/1/97 - 75% without restriction*
  • From 23/1/97 - 90% without restriction
• Livestock, Bloodstock and Farm Machinery **
  • From 11/4/94 to 7/2/95 - 25% without restriction
  • From 8/2/95 to 22/1/96 - 50% without restriction
  • From 23/1/96 to 22/1/97 - 75% without restriction
  • From 23/1/97 - 90% without restriction

* Where the market value of the gift of agricultural land and buildings received between 23/1/96 and 22/1/97 was less than € 457,106, it is possible that a greater amount of relief would have been obtained had the rates applying from 8/2/95 to 22/1/96 continued. In such cases the higher rate applies.

** There was no agricultural relief for livestock, bloodstock and farm machinery in respect of gifts and inheritances taken prior to 11/4/94

Historical Relief - Inheritances

Agricultural Relief - Rates, Limits and ‘Farmer’ Percentage Tests

Note: Each of the dates given refer to the date of the Gift/Inheritance and not the Valuation Date (which may be different)

‘Farmer’ Percentage Test

• Up to 28/5/91 - 75%
• From 29/5/91 - 80%

Reduction in Market Value

• Lands and Buildings
  • Up to 31/3/80 - 50% subject to maximum relief of €126,974
  • From 1/4/80 to 31/3/82 - 50% subject to max of €190,461
  • From 1/4/82 to 29/1/91 - 50% subject to max of €253,948
  • From 30/1/91 to 10/4/94 - 55% subject to max of €253,948
  • From 11/4/94 to 7/2/95 - 30% without restriction plus
  • 35% subject to max of €133,322
  • From 8/2/95 to 22/1/96 - 50% without restriction plus
  • 15% subject to max of €57,138
  • From 23/1/96 to 22/1/97 - 75% without restriction*
  • From 23/1/97 - 90% without restriction
• Livestock, Bloodstock and Farm Machinery **
  • From 11/4/94 to 7/2/95 - 25% without restriction
  • From 8/2/95 to 22/1/96 - 50% without restriction
  • From 23/1/96 to 22/1/97 - 75% without restriction
  • From 23/1/97 - 90% without restriction

* Where the market value of the gift of agricultural land and buildings received between 23/1/96 and 22/1/97 was less than €457,106, it is possible that a greater amount of relief would have been obtained had the rates applying from 8/2/95 to 22/1/96 continued. In such cases the higher rate applies.

** There was no agricultural relief for livestock, bloodstock and farm machinery in respect of gifts and inheritances taken prior to 11/4/94

Additional Notes

Where the date of the gift/inheritance is prior to 6 April 1994 (unless the Valuation Date is after 6 April, 1994) the beneficiary must also be ordinarily resident in the State at the Valuation Date in order to qualify for agricultural relief.

Where the date of the gift / inheritance is on or after 2 June, 1995 the relief is withdrawn unless the beneficiary is resident in the State for all of the three tax years immediately following the tax year in which the valuation date falls.

There is no agricultural claw-back of relief on sale of property disposed of within six to ten years of the gift of inheritance in respect of gifts and inheritances taken prior to 2nd February 2006.

Where the date of the gift/inheritance is prior to 2nd February 2006, the beneficiary must also be domiciled in the State at the Valuation Date in order to qualify for agricultural relief, except where the relief applied to trees or under wood.

Further Information

Further information on Capital Acquisitions Tax is located on our website

If you need further clarification on the application of agricultural relief please contact:

Capital Acquisitions Tax Unit,
Taxpayer Information Service,
1st Floor,
CRIO,
Cathedral Street,
Dublin 1.

LoCall: 1890 20 11 04

Email: catdr@revenue.ie

May 2012