Capital Acquisitions Tax Consolidation Act 2003 (Number 1 of 2003)
PART 10
Reliefs
Chapter 1
Agricultural relief
89 Provisions relating to agricultural property.
[CATA 1976 s19]
(1) In this section—
[3]>
“agricultural property” means agricultural land, pasture and woodland situate in the State and crops, trees and underwood growing on such land and also includes such farm buildings, farm houses and mansion houses (together with the lands occupied with such farm buildings, farm houses and mansion houses) as are of a character appropriate to the property, and farm machinery, livestock and bloodstock on such property;
<[3]
[3]>
“agricultural property” means—
(a) agricultural land, pasture and woodland situate [6]>in the State<[6][6]>in a Member State<[6] and crops, trees and underwood growing on such land and also includes such farm buildings, farm houses and mansion houses (together with the lands occupied with such farm buildings, farm houses and mansion houses) as are of a character appropriate to the property, and farm machinery, livestock and blood-stock on such property, and
(b) a payment entitlement (within the meaning of [14]>Council Regulation (EC) No. 1782/2003 of 29 September 20031<[14][14]>Regulation (EU) No. 1307/2013 of the European Parliament and of the Council of 17 December 20131<[14]);
<[3]
“agricultural value” means the market value of agricultural property reduced by 90 per cent of that value;
[12]>
“farmer” in relation to a donee or successor, means an individual [4]>who is domiciled in the State and<[4] in respect of whom not less than 80 per cent of the market value of the property to which the individual is beneficially entitled in possession is represented by the market value of property [6]>in the State<[6][6]>in a Member State<[6] which consists of agricultural property, and, for the purposes of this definition—
[5]>
(a) no deduction is made from the market value of property for any debts or encumbrances, and
<[5]
[5]>
(a) no deduction is made from the market value of property for any debts or encumbrances (except debts or encumbrances in respect of a dwelling house which is the only or main residence of the donee or successor and which is not agricultural property), and
<[5]
(b) an individual is deemed to be beneficially entitled in possession to—
(i) an interest in expectancy, notwithstanding the definition of “entitled in possession” in section 2, and
(ii) property which is subject to a discretionary trust under or in consequence of a disposition made by the individual where the individual is an object of the trust.
<[12]
[12]>
“farmer”, in relation to a donee or successor, means an individual in respect of whom not less than 80 per cent of the market value of the property to which the individual is beneficially entitled in possession is represented by the market value of property in a Member State which consists of agricultural property, and, for the purposes of this definition—
(a) no deduction is made from the market value of property for any debts or encumbrances (except debts or encumbrances in respect of a dwelling-house that is the only or main residence of the donee or successor and that is not agricultural property), and
(b) an individual is deemed to be beneficially entitled in possession to—
(i) an interest in expectancy, notwithstanding the definition of “entitled in possession” in section 2, and
(ii) property that is subject to a discretionary trust under or in consequence of a disposition made by the individual where the individual is an object of the trust,
and who—
(i) is the holder of any of the qualifications set out in Schedule 2, 2A or 2B to the Stamp Duties Consolidation Act 1999, or who achieves such a qualification within a period of 4 years commencing on the date of the gift or inheritance, and who for a period of not less than 6 years commencing on the valuation date of the gift or inheritance farms agricultural property (including the agricultural property comprised in the gift or inheritance) on a commercial basis and with a view to the realisation of profits from that agricultural property,
(ii) for a period of not less than 6 years commencing on the valuation date of the gift or inheritance spends not less than 50 per cent of that individual’s normal working time farming agricultural property (including the agricultural property comprised in the gift or inheritance) on a commercial basis and with a view to the realisation of profits from that agricultural property, or
(iii) leases the whole or substantially the whole of the agricultural property, comprised in the gift or inheritance for a period of not less than 6 years commencing on the valuation date of the gift or inheritance, to an individual who satisfies the conditions in paragraph (i) or (ii).
<[12]
[10]>
(1A) For the purpose of paragraph (a) of the definition of “farmer” in subsection (1), a loan secured on the dwelling-house referred to in that paragraph which is not used to purchase, repair or improve that dwelling-house will not be treated as a debt or an encumbrance.
<[10]
[15]>
(1B) (a) In this subsection—
(i)“solar panel” means ground-mounted equipment used to capture solar energy and convert it into electrical energy together with ancillary equipment used to harness, store and transfer the electrical energy;
(ii)a reference to “agricultural land” is to agricultural land comprised in a gift or inheritance.
(b)Notwithstanding that solar panels are installed on agricultural land, subject to paragraph (d), the land shall be regarded as agricultural land for the purposes of the definition of “agricultural property” in subsection (1).
(c)Where agricultural land on which solar panels are installed is leased, subject to the conditions specified in paragraph (iii) of subsection (1)——
(i)the lessor shall be regarded as having leased the whole or substantially the whole of the agricultural property where less than this amount has been leased, and
(ii)the lessee shall be regarded as satisfying the conditions specified in paragraph (i) or (ii) of subsection (1), as the case may be.
(d)Paragraphs (b) and (c) shall not apply where—
(i)solar panels are installed on more than half the total area of the agricultural land concerned, or
(ii)in relation to the individual referred to in the definition of “farmer” in subsection (1), the conditions specified in paragraph (i), (ii) or (iii) of subsection (1), as the case may be, are not satisfied with regard to the agricultural land on which solar panels are not installed.
<[15]
(2) Except where provided in subsection (6), in so far as any gift or inheritance consists of agricultural property—
(a) at the date of the gift or at the date of the inheritance, and
(b) at the valuation date,
and is taken by a donee or successor who is, on the valuation date and after taking the gift or inheritance, a farmer, section 28 (other than subsection (7)(b) of that section) shall apply in relation to agricultural property as it applies in relation to other property subject to the following modifications—
(i) in subsection (1) of that section, the reference to market value shall be construed as a reference to agricultural value,
(ii) where a deduction is to be made for any liability, costs or expenses in accordance with subsection (1) of that section only a proportion of such liability, costs or expenses is deducted and that proportion is the proportion that the agricultural value of the agricultural property bears to the market value of that property, and
(iii) where a deduction is to be made for any consideration under subsection (2) or (4)(b) of that section, only a proportion of such consideration is deducted and that proportion is the proportion that the agricultural value of the agricultural property bears to the market value of that property.
(3) Where a taxable gift or a taxable inheritance is taken by a donee or successor subject to the condition that the whole or part of that taxable gift or taxable inheritance will be invested in agricultural property and such condition is complied with within 2 years after the date of the gift or the date of the inheritance, then the gift or inheritance is deemed, for the purposes of this section, to have consisted—
(a) at the date of the gift or at the date of the inheritance, and
(b) at the valuation date,
of agricultural property to the extent to which the gift or inheritance is subject to such condition and has been so invested.
[1]>
(4) (a) The agricultural value shall cease to be applicable to agricultural property, other than crops, trees or underwood, if and to the extent that such property, or any agricultural property which directly or indirectly replaces such property—
(i) is sold or compulsorily acquired within the period of 6 years after the date of the gift or the date of the inheritance, and
(ii) is not replaced, within a year of the sale or within 6 years of the compulsory acquisition, by other agricultural property,
and tax is chargeable in respect of the gift or inheritance as if the property were not agricultural property, but this paragraph shall not apply where the donee or successor dies before the property is sold or compulsorily acquired.
<[1]
[1]>
(4) (a) Where—
(i) all or any part of the agricultural property (other than crops, trees or underwood) comprised in a gift or inheritance is disposed of or compulsorily acquired within the period of 6 years [8]>after<[8][8]>commencing on<[8] the date of the gift or inheritance, and
(ii) the proceeds from such disposal or compulsory acquisition are not fully expended in acquiring other agricultural property within a year of the disposal or within 6 years of the compulsory acquisition,
then, except where the donee or successor dies before the property is disposed of or compulsorily acquired, all or, as the case may be, part of the agricultural property shall, for the purposes of subsection (2) and in accordance with paragraph (aa), be treated as property comprised in the gift or inheritance which is not agricultural property, and the taxable value of the gift or inheritance shall be determined accordingly (without regard to whether the donee or successor has ceased to be a farmer by virtue of the disposal or compulsory acquisition) and tax shall be payable accordingly.
(aa) For the purposes of paragraph (a)—
(i) the market value of agricultural property which is treated under paragraph (a) as not being agricultural property is determined by the following formula—
V1 |
× |
N |
|
V2 |
where—
V1 is the market value of all of the agricultural property on the valuation date without regard to paragraph (a),
V2 is the market value of that agricultural property immediately before the disposal or compulsory acquisition of all or, as the case may be, a part thereof, and
N is the amount of proceeds from the disposal or compulsory acquisition of all the agricultural property or, as the case may be, a part thereof, that was not expended in acquiring other agricultural property,
and
(ii) the proceeds from a disposal include an amount equal to the market value of the consideration (not being cash) received for the disposal.
<[1]
(b) If an arrangement is made, in the administration of property subject to a disposition, for the appropriation of property in or towards the satisfaction of a benefit under the disposition, such arrangement is deemed not to be a [2]>sale<[2][2]>disposal<[2] or a compulsory acquisition for the purposes of paragraph (a).
[11]>
(c) The agricultural value in relation to a gift or inheritance referred to in subsection (2) shall cease to be applicable to agricultural property, other than crops, trees or underwood, if the donee or successor is not resident in the State for any of the 3 years of assessment immediately following the year of assessment in which the valuation date falls.
<[11]
[7]>
(4A) Where the proceeds referred to in subparagraph (ii) of subsection (4)(a) are expended in acquiring agricultural property which has been transferred by the donee or successor to his or her [9]>spouse<[9][9]>spouse or civil partner<[9], such property shall not be treated as other agricultural property for the purposes of that subparagraph.
<[7]
[13]>
(4B) Where a donee, successor or lessee ceases to qualify as a farmer under subsection (1) within the period of 6 years commencing on the valuation date of the gift or inheritance, all or, as the case may be, part of the agricultural property shall for the purposes of subsection (2), otherwise than on the death of the donee, successor or lessee, be treated as property comprised in the gift or inheritance that is not agricultural property, and the taxable value of the gift or inheritance shall be determined accordingly and tax shall be payable accordingly.
<[13]
(5) For the purposes of subsection (2), if, in the administration of property subject to a disposition, property is appropriated in or towards the satisfaction of a benefit in respect of which a person is deemed to take a gift or an inheritance under the disposition, the property so appropriated, if it was subject to the disposition at the date of the gift or at the date of the inheritance, is deemed to have been comprised in that gift or inheritance at the date of the gift or at the date of the inheritance.
(6) Subsection (2) shall apply in relation to agricultural property which consists of trees or underwood as if the words “and is taken by a donee or successor who is, on the valuation date and after taking the gift or inheritance, a farmer,” were omitted from that subsection.
(7) In this section, any reference to a donee or successor includes a reference to the transferee referred to in section 32(2).
[1]
Substituted by FA05 s135(1)(a). This section has effect in relation to disposals or compulsory acquisitions of agricultural property occurring on or after 3 February 2005.
[2]
Substituted by FA05 s135(1)(b). Has effect in relation to disposals or compulsory acquisitions of agricultural property occurring on or after 3 February 2005.
[3]
Substituted by FA06 s118(1)(a)(i). This section is deemed to have applied as regards gifts and inheritances of agricultural property taken on or after 1 January 2005.
[4]
Deleted by FA06 s118(1)(a)(ii). Applies to gifts and inheritances taken on or after 2 February 2006.
[5]
Substituted by FA07 s117(1). This section applies to gifts and inheritances taken on or after 1 February 2007.
[6]
Substituted by F(No.2)A08 s89(1). Applies to gifts and inheritances taken on or after 20 November 2008.
[7]
Inserted by FA10 s(146)(1). This section applies to transfers executed on or after 4 February 2010.
[8]
Substituted by FA11 s68(1)(a). Applies to gifts and inheritances taken on or after 21 January 2011.
[9]
Substituted by F(No.3)A11 sched3(22). Shall apply to gifts and inheritances taken on or after 27 July 2011.
[10]
Inserted by FA12 s114(1)(a). Applies to gifts and inheritances taken on or after 8 February 2012.
[11]
Deleted by FA12 s114(1)(b). Applies to gifts and inheritances taken on or after 8 February 2012.
[12]
Substituted by FA14 s82(1)(a). Has effect in relation to gifts or inheritances taken on or after 1 January 2015.
[13]
Inserted by FA14 s82(1)(b). Has effect in relation to gifts or inheritances taken on or after 1 January 2015.
[14]
Substituted by FA14 sched3(3). Has effect as respects gifts and inheritances taken on or after 1 January 2015.
[15]
Insertted by FA17 s72. Note: The section would be amended by the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2019 (8/2019). However, as Part 6 of this Act is not commenced at the date of consolidation these amendments are not reflected in the text above.