Capital Gains Tax (CGT) is chargeable on gains arising on the disposal of assets. For farmers certain reliefs may apply.
Retirement Relief from Capital Gains Tax
Retirement Relief from Capital Gains Tax (CGT) is available where an individual, who is at least 55 years of age (with some exceptions such as chronic ill-health) disposes, by way of sale or gift, of the whole or part of his/her qualifying assets. The amount of retirement relief from CGT available is dependent on whether qualifying assets transferred are parent-to-child transfers or transfers other than to a child
Transfers to a child
Full relief may be claimed by an individual aged 55 – 65 years of age on the disposal of the whole or part of his/her qualifying assets to his/her child. Full relief may be claimed in respect of the consideration for the disposal of qualifying assets worth up to €3 million in the case of individuals aged 66 years or more with effect from the 1 January 2014. Where the consideration exceeds €3 million, relief will be given in respect of the CGT chargeable on any gain accruing on the disposal by individuals aged 66 or more as if the consideration for the disposal had been €3 million. The relief is clawed back where the child disposes of an asset within 6 years of the date of acquisition from his/her parent. For parent to child transfer a child can include a child of a deceased child. Foster child or nephew/niece transfers may also qualify in certain circumstances provided further specific qualifying criteria are met.
Transfers other than to a child
From 1st January 2014 where the disposal consideration does not exceed €750,000, relief from CGT is given in respect of the full amount of tax chargeable on the disposal in the case of an individual aged 55 – 65 years of age. The amount of full relief for individuals aged 66 years or more has been reduced from €750,000 to €500,000. Where the consideration exceeds the thresholds set out above, marginal relief applies so as to limit the amount of tax chargeable to 50% of the difference between the amount of the disposal consideration and €750,000/€500,000 thresholds.
Changes introduced in Budget 2015 give farmers who let their land on conacre and who ultimately dispose of their land to a person other than a child a once off opportunity to avail of CGT retirement relief, provided they satisfy the other requirements of the relief, where they either:
- Dispose of their land on or before 31 December 2016, or
- Lease their land on or before 31 December 2016 for a minimum period of 5 years (up to a maximum of 25 years) and ultimately dispose of the land.
A CGT relief for farm restructuring was introduced in Budget 2013 and initially only permitted the purchase and disposal of outlying parcels from the main farm hub as qualifying transactions. To be eligible for the relief, the sale and purchase of qualifying land(s) must occur within 24 months of each other with the initial sale or purchase of qualifying land taking place in the period 1 January 2013 – December 2019.
Changes announced in Budget 2015 allowed for whole farm replacement, i.e. the disposal of an entire smaller or fragmented farm holding and replacement with a larger or more efficient farm holding. Relief is only available to claimants who are issued with a Farm Restructuring Certificate by Teagasc.
Relief for Transfer of a Site from Parent to Child
An exemption from CGT is available for the disposal of a site from a parent to a child where the transfer is to enable the child to construct a principal private residence on the site. The market value of the site must not exceed €500,000. The area of the site (exclusive of the area on which the house is to be built) must not exceed 0.4 ha or 1 acre. If the child subsequently disposes of the site without having occupied a principal private residence on the site for at least 3 years, then the capital gain which would have accrued to the parent on the initial transfer will accrue to the child in addition to his/her own gain. However, a gain will not accrue to the child where he or she transfers an interest in the site to a spouse or civil partner. This measure is available to both farmers and non-farmers.