The limits of agricultural relief

farm the land himself, but rather he is going to lease it to a qualifying farmer, he is subject to satisfying the 75pc condition as referred to above.

He has no use for the stock and machinery and these will have to be disposed of.

Furthermore, because he is not going to farm the holding and reside in the farmhouse, the house no longer qualifies as being in use for qualifying farming purposes.

As the house, land and stock comprise 32pc of the total, the land only makes up 68pc, thereby falling well short of the 75pc minimum limit.

This particular condition only came into play in the 2014 legislation — where successors were allowed to lease out the farm to a qualified or full-time farmer.

Any person contemplating succession, particularly where the farm is likely to be leased out, would need to be mindful of this 75pc rule.

In this particular case John will face a tax bill of €186,780 if he fails to qualify for Agricultural Relief.

Options

The beneficiary, John in this case is limited in his options for the reason that he does not intend to farm the land himself. However, there are a number of actions that could be considered such as: • Revisit the land and dwelling valuations and see if there is any legitimate scope for adjustment. Valuers often tend to err on the side of caution by pitching land values towards the mid or lower end of the current market Do value spread in anticipation of a possible tax liability arising, whereas in this case the higher the land value, the better in terms of exceeding the 75pc threshold. • Consider reinvesting the proceeds of sale of the stock and farm machinery on the farm in, say, a new farm building. This would mean that the 75pc threshold could be satisfied.

Martin O’Sullivan is the author of the ACA He is a partner in O’Sullivan Malone and Company, accountants and registered auditors,