Revenue Note for Guidance

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Revenue Note for Guidance

664 Relief for certain income from leasing of farm land

Summary

This section exempts from income tax certain income arising from leasing of farm land. The amounts may vary depending on when the lease was made. Prior to 1 January 2015 a “qualifying lessor” related to an individual who aged 40 years or more or was permanently incapacitated by reason of mental or physical infirmity from carrying on a trade of farming and who had not leased the land after 30 January 1985 from a connected person on terms other then terms that would have been included on a lease concluded on an arm’s length basis. With effect from 1 January 2015 the lower age limit of 40 and the reference to permanent incapacity is removed from the definition of a ”qualifying lessor”. In addition, with effect from 1 January 2015 a “qualifying lessee” includes a company. The lessee must not be “connected” (see section 10) with the qualifying lessor or lessors.

Where a lease period covers part of a full year, the exemption limit is apportioned on a time basis.

Any increased rent payable under such leases which reflects the fact that an EU Single Payment has been transferred with the land, will be treated as rent from farm land. This means the tax exemption can apply to these amounts also.

Details

Definitions

“EU Single Payment Scheme’ means the scheme administered by the Minister for Agriculture, Food and the Marine under Regulation (EU) No. 1307/2013 of the European Parliament and of the Council of 17 December 2013, amended by Commission Delegated Regulation (EU) No. 639/2014 of 11 March 2014, Commission Delegated Regulation (EU) 994/2014 of 13 May 2014, Commission Delegated Regulation (EU) 1001/2014 of 18 July 2014, Commission Delegated Regulation (EU) 1378/2014 of 17 October 2014 and Commission Delegated Regulation (EU) 2015/851 of 27 March 2015.

“farm land”, in addition to its general meaning for income tax purposes as land in the State wholly or mainly occupied for husbandry, also includes farm buildings situated on the land, other than buildings or parts of a building used as dwellings. This extended definition is intended to cater for leases relating to both land and farm buildings covered by the same lease.

(1) “lease”, “lessee”, “lessor” and “rent” derive their meanings from Chapter 8 of Part 4 which deals with the taxation of rental income. Thus, “lease” includes an agreement for a lease and any tenancy, but does not include a mortgage, and “lessee” and “lessor” are construed accordingly. The terms “lessee” and “lessor” include, respectively, the successors in title of a lessee or a lessor. The term “rent” includes any payment in the nature of rent and also any payment made by the lessee to defray the cost of work of maintenance or repairs for which the lessor is responsible.

“qualifying lease” is a lease of farm land which —

  • is in writing or evidenced in writing,
  • is for a definite term of 5 years or more, and
  • is made on an arm’s length basis between one or more qualifying lessors and one or more qualifying lessees.

“qualifying lessee” is intended to exclude from relief leases made between family members and near relatives. The lessee must not be “connected” (see section 10) with the qualifying lessor or any one of the qualifying lessors where there is a letting by persons in multiple-ownership of the farm land. The definition ensures that relief is available only if the leased land is actually used by the lessee or lessees for the purposes of a trade of farming.

“qualifying lessor” is an individual who has not leased the land after 30 January 1985 to a connected person other than on an arm’s length basis.

“the specified amount” is the maximum exemption allowed. It is the lower of the surplus from the farm rental income or an amount which varies depending on when the qualifying lease was made.

For leases made beginning 1 January 2007 and ending on 31 December 2014, the specified amount is

€20,000 for a lease of at least 10 years or more,

€15,000 for a lease of 7 or more years but less than 10 years and

€12,000 in any other case.

For qualifying leases taken out on or after 1 January 2015 the specified amount is:

  • €40,000 in the case of a qualifying lease or leases where the leases/leases are for a definite period of 15 years or more,
  • €30,000 in the case of a qualifying lease or leases where the leases/leases are for a definite period of 10 or more years but less than 15 years,
  • €22,500 in the case of a qualifying lease or leases where the leases/leases are for a definite period of 7 or more years but less than 10 years, and
  • €18,000 in any other case.

Where a lease period covers part of a full year, the exemption limit apportioned accordingly on a time basis.

The relief

(2) Where the total income of a qualifying lessor consists of rental income chargeable to tax under Case V of Schedule D and includes income from the leasing of farmland let under a qualifying lease, the qualifying lessor is entitled to a deduction which is the lower of the overall Case V income or the specified amount.

(3) Where a husband and wife or civil partners are jointly assessed (section 1017/1031C) or separately assessed (section 1023/1031H) and both are involved in qualifying leasing, each is entitled to a separate exemption. This is arrived at as if they were not married or in a civil partnership. Unused balances of the relief are not, therefore, transferable from one spouse or civil partner to the other.

(4) Where a single qualifying lease covers both farm land and other property, only the rent as is properly attributable to the farm land is to benefit from the exemption.

(5) A Revenue officer may, by notice in writing, call for information from the lessor to enable the officer to determine the amount of relief to be given.

Miscellaneous

(6) The various provisions that apply to the granting of personal allowances and reliefs apply to the deduction.

(7) With effect from 1 January 2005, any payments received by a lessor of farm land to compensate him or her for the loss of any EU Single Payments which have been transferred to the lessee along with the leased land will be treated as rent from farm land. This means that, subject to the overall limits, the exemption can apply to these payments.

Anti-avoidance

(8) As an anti-avoidance measure to prevent the exploitation of relief available under the section, a lease shall not be a qualifying lease in circumstances where a person effectively swaps land with another person or where the land is farmed, in whole or in part, by the qualifying lessor.

Relevant Date: Finance Act 2019