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Farmers’ December 31 Deadline

By Administrator on November 19, 2014 in Taxation
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Approaching Deadline

AgriTax

Agri-Tax Review, Budget 2015

Farmers, are you aware of the 31 December 2014 deadline. The new measures introduced in the recent budget are aimed at making the “agricultural sector more efficient and productive”. However this will have major implications for the part-time farmer. Set out below is a case study to show the implications of the new changes:

Case Study

Farmer X, aged 75, has 70 acres. His son, aged 40, is a full-time electrician and farms the land with dry stock. The son is married with two children, the family home is worth €175,000 and the mortgage is €125,000. His car is worth €10,000 and he has €5000 in savings. What happens if he inherits the land before 31st December 2014? Answer: No Tax liability as Agricultural relief applies (80% of his assets are agricultural).

  • Non-Agri Assets Home joint ownership (175-125)/2 €25,000
  • Savings and Car €15,000
  • Total Non Agri Property €40,000
  • Say Land valued at €10,000 per acre
  • Asset Test 700,000/740000 94%

Agricultural relief reduces his inheritance to €70,000 and as the threshold from parent to child is €225,000 no liability arises.

What happens if he inherits the land after 1st January 2015? He will not qualify for agricultural relief as he will not be an active farmer. His liability may then be €157,000.

  • Inheritance €700,000
  • Threshold €225,000
  • Taxable value €475,000
  • Tax @ 33% €156,750

The only way to avoid this liability is to lease the land for 6 years to an active farmer. Remember, entitlements or the new basic payments will go with the land. Unless the legislation is changed at committee stage it is crucial to review your succession plans NOW. If you take this scenario and the current beef prices, the son may be financially better off leasing the land, but be aware of the changes ahead for part-time farmers.

Note: The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice. Donal: 086 2079878

 

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