Tax implications of a farm transfer
THE succession of any farm, business or estate needs early planning to overcome oftentaxation and legal issues.
The objective is to implement efficient structures and not handicap the enterprise with substantial tax costs compromising the future viability of an enterprise.
There are a number of practicalities to take into consideration:
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Has the transferor income security after transferring farm? Transferor remain in business and maintain control if desired. Should rights be retained
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• over property? What are the tax implications for the farm dwelling? Equity of all family members must be considered.
If there’s no natural successor, what options are there?
There are also taxation matters to consider:
Capital Gains Tax (CGT) – Transferor
Tax arising on the disposal of the asset, with a rate of tax of 33 per cent on the chargeable gain.
There is a relief from CGT known as Retirement Relief. The earliest opportunity to avai isl at age 55. The amount of relief depends on various factors.
Capital Acquisitions Tax (CAT) – Transferee
CAT is the tax on a inheritance.
A certain amount of a benefit received is tax free – for example, for a child, €335,000; for a niece or nephew, €32,500. Excess is taxed at 33 per cent gift or
Agricultural Relief
A significant relief of 90 per cent can apply to agricultural property. Significant provisions apply to qualify.
Favourite Nephew/Niece Relief
This is a relief from CAT where a beneficiary is treated as a child of their uncle/aunt.
Kerry Group PLC Shares
Some dairy farmers in Kerry have accumulated wealth in Kerry Group Plc and Co Op shares. Shares complicate succession planning, and certain planning tools can be utilised.
Stamp Duty – Transferee The rate of Stamp Duty on non-residential property is currently 7.5 per cent, and for residential, this is one per cent.
Young Trained Farmer Relief – under 35 with agricultural qualification.
Consanguinity relief reduces rate to one per cent.
Conclusion
Succession and inheritance planning can be a very complex area, and there is no ‘one-sizefitsapproach.
The process should begin as soon as possible, and engagement with a qualified Chartered Tax Adviser (CTA) is recommended. Visit www.alanlyonstax.ie for further information.