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.
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.
For Gifts and Inheritances taken on or after 20th November, 2008 ‘Agricultural property’ means:
* 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:
Shares in a company deriving their value from agricultural property do not qualify for agricultural relief but may qualify for business relief.
Agricultural assets not qualifying for agricultural relief may qualify for business relief. (For further information see Business Relief Leaflet - (CAT 4).
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.
Example 1 |
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‘Farmer’ Test - Mary owns a house (not a farmhouse) valued at €80,000 with a mortgage of € 20,000; a car worth €5,000; and has €2,000 in a bank deposit account. She receives a gift of farmland worth €300,000 plus livestock and farm machinery worth €50,000. Is Mary a ‘farmer’ for the purpose of agricultural relief? |
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Farmer test calculation
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The gross market value of Mary’s assets after taking the gift is €417,000; the gross market value of her agricultural assets is €350,000 |
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(€350,000 / €417,000) x €100 = 83.9% |
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Therefore Mary, is a ‘farmer’ for the purposes of the Relief
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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.
Example 2 |
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On 1 May, 1999, John transfers agricultural property with a market value of € 300,000 to his daughter Patricia. Patricia qualifies as a ‘farmer’. |
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The agricultural value of the property is calculated as follows:
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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.
Example 3 |
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Assume that in the previous example Patricia paid €50,000 consideration for the agricultural property and €10,000 in expenses and costs associated with the transfer. The amount of the consideration, expenses and costs deductible in arriving at the taxable value of the property is calculated using the following simple formula. |
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(Agricultural Value of the property €30,000 / Open market value of property €300,000) x Cost and Expenses €10,000 = €1,000 |
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(Agricultural Value of the property €30,000 / Open market value of property €300,000) x Consideration €50,000 = €5,000 |
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Therefore, the taxable value of the property for gift tax purposes is:
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An Agricultural Relief Claim must be made online by filing an IT38 (Inheritance Tax/Gift Tax Return form) through ROS, Revenue’s online service.
Yes. There are a number of circumstances in which the relief can be withdrawn or partially clawed back.
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
Reduction in Market Value
* 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
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
Reduction in Market Value
* 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 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
May 2012