Capital Acquisitions Tax - Agricultural Relief

Answers To Commonly Asked Questions on Agricultural Relief

• It is agricultural land that determines whether the relief applies - hence the danger of separating the farmhouse and other buildings from the land by separate transfers. The farmhouse etc., without the land, is not agricultural property. Therefore, if a farmhouse on its own is transferred to a farmer it will not qualify for agricultural relief. On the other hand, if the farm is then subsequently gifted or devised to the same beneficiary, thereby "rejoining" the house and land, the house will subsequently count as agricultural property for the 80% farmer test for any later transfers taken by that beneficiary. If the land is gifted to the farmer, and the donor separately retains the house, the house will not be "agricultural property" on its own assuming it is later gifted or devised to the same beneficiary and although it may rejoin the agricultural property and become, again, agricultural, it was not agricultural property at the date of the gift or the inheritance.
• Claims for Agricultural Relief in relation to small acreages of land are determined by reference to the circumstances of each case. However, in general, the Revenue Commissioners consider that small parcels of land do not constitute agricultural property and do not therefore qualify for agricultural relief. In this regard the Appeal Commissioners, in February 2012, determined that a small parcel of land of 0.14 acres was not agricultural property. Practitioners will also be aware of the UK case of Starke (executors of Brown deceased) v IRC [1996] 1 All ER 622) and the circumstances in which 2.5 acres of land with a farmhouse and certain buildings was held not to be agricultural land.
• Crops, trees and underwood growing on agricultural land qualify for agricultural relief. However, crops or trees that have been harvested or cut down do not qualify for the relief.
• Farm machinery, livestock and bloodstock physically situated on agricultural land qualify for agricultural relief. Such assets owned however, by a dealer in livestock or bloodstock or by a vendor of farm machinery and not situate on any agricultural land would not qualify for agricultural relief but may qualify instead for Business relief.
• The agricultural relief is, as stated, allowed to farm machinery, livestock or bloodstock once they are situated on agricultural lands and irrespective of whether or not the lands are actually owned by the disponer.
• The Revenue Commissioners accept that any interest, which a beneficiary may have, in a pension or pension fund can be ignored when calculating whether a beneficiary meets the 80% agricultural assets farmer test.
• The 80% agricultural assets "farmer" test is applied at the Valuation Date of the gift or inheritance. The Valuation Date in a case of a gift is the date the gift takes place. The Valuation Date in the case of an inheritance is normally the Date the Grant of Probate or the Grant of Administration issues in the estate.
• Agricultural relief is clawed back where the agricultural property is disposed of or compulsorily acquired within six years of the gift or inheritance and the proceeds are not reinvested in other agricultural property within one year of the sale or within six years of the compulsory purchase. The Revenue Commissioners accept that the proceeds from a disposal of agricultural property that needs to be expended in acquiring other agricultural property in order to avoid a clawback of the relief are the net sale proceeds after Capital Gains Tax is paid, where the Capital Gains Tax is paid out of the disposal proceeds.
• It is not necessary that reinvestment is made in the same type of agricultural property. For example, the proceeds from the sale of livestock could be reinvested in land or machinery without losing the relief.
• The expenditure of sale proceeds on the construction of new agricultural buildings on other land owned by the farmer or the expenditure of sale proceeds on the demolition of old agricultural buildings on such other land and their replacement by the construction of new agricultural buildings will not result in a clawback of the relief. This is the situation where the construction of the new or replacement agricultural buildings improves the value of the agricultural lands on which they are built.

Part 11 of the Capital Acquisitions Tax Manual on Agricultural Relief has been updated to include the above answers.