Decoding the changes in Agricultural Relief: FDC Group’s guide for farmers and beneficiaries
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Regional Tax Manager of FDC Tax Department Limited, outlines what Finance Bill 2024 could mean for Agricultural Relief restrictions.
When discussing any Finance Bill, it is important to point out that the publication of the bill is a step in a process ending with the President signing a new Finance Act into law.
This process allows the proposed amendments to the tax code to be reviewed. These reviews can result in no change, tweaks and even the deletion of entire sections of the bill. This article may quickly become outdated on the publication of the Finance Act.
There are two significant changes contained in the proposed new Agricultural Relief legislation.
It is proposed to introduce conditions in relation to the disponer’s (the person providing the farm) use of the land during the six-year period prior to the gift or inheritance. These new conditions are only relevant from the 1st of January. This six-year period is deemed to be fulfilled by the disponer provided that they are satisfied from 1st of January 2025 onwards.
From the 1st of January, the disponer must satisfy one of the following three conditions:
- a) The disponer must farm the land on a commercial basis for more than 50% of his normal working week.
- b) Where the disponer holds a Relevant Agricultural qualification, the time condition is removed and they only need to farm the land on a commercial basis.
- c) They lease the property to a person that satisfies condition (a) or (b).
It is possible for part of the land to be satisfied by condition (a) or (b) and some of the land to be satisfied by condition (c) i.e. part of the farm can be leased and part of the farm can be farmed. These conditions also apply to the beneficiary.
A proposed amendment to Young Trained Farmer Stamp Duty Relief contained in the Finance Bill allows for the leasing of land to certain farming companies. It would have been welcome if such an amendment was also introduced for Agricultural Relief. In the absence of this amendment, we will require an extension of Revenue’s concession allowing such leasing arrangements under Agricultural Relief.
I believe the legislation as drafted does not properly deal with the situation where a non-farming spouse is a joint owner or owner of the land. Some provision is made for a spouse inheriting (on death) but the author does not believe they are adequate. No provision is made to relax the use and ownership conditions where a spouse acquires a life-time gift of the farm. This will result in the situation where it is unadvisable for a spouse who does not satisfy the active farmer conditions, to have an interest in farmland.
It would be unsatisfactory if the relief is operational in many cases as a result of Revenue concessions. Such concessions can be disapplied by Revenue as they see fit including on a case-by-case basis.
The other significant change was the removal of S89(3). This subsection allowed money and moneys-worth to be gifted/bequeathed with the condition that it be invested in Agricultural Property within a two-year period. If this condition was satisfied, then the fund received could have the benefit of Agricultural Relief. This relief could be accessed by non-farmers and played a role in driving up land values.
It is disappointing that the baby was thrown out with the bathwater as this provision played an important role in development farming enterprises and creating a successful succession. Many farmers have spent a lifetime building up the funds to buy additional farmland. There comes a point when it makes sense for the next generation to purchase the farmland and S89(3) facilitated this practical arrangement.
Prior to 2015 and the active farmer test, Agricultural Relief was relatively straight forward. The changes in 2015 added a layer of complication but the relief generally continued to be available to the genuine farming family.
Farming families will have to be even more proactive in their succession planning as I believe it will far too easy to inadvertently fall outside these new conditions.