Does the Average AAM user know about these tax reliefs

J

Joe_90

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Hypothetically speaking we have a client who has farmland and a number of daughters.

He is proposing to transfer some land worth €1,000,000 to one of his daughters.

As he has farmed the land for years he does not pay Capital Gains Tax.

His daughter who is living in Dublin training in Childcare has no assets so qualifies for Agricultural Relief for Capital Acquisitions Tax so the value of the gift is reduced by 90% to €100,000 which is below the Class A threshold so no CAT is payable. Now she has to hold the land for 6 years to avoid a clawback but that's not an issue.

He has some money on deposit and is proposing to purchase a house valued at €250,000 for his daughter in Dublin. He proposes to transfer the property to his daughter in 3 years (he will suffer the CGT if any) but his daughter would be exempt from CAT under the dwelling house exemption.

So the daughter will be qualified in 3 years and proposed to run a Childcare business from her house earning €15,000 per annum. This income is exempt from income tax under the Childcare exemption.

The father has arranged with a local farmer to rent the daughters land for €15,000 per annum this is exempt under the farmland leasing exemption from 1 January 2015.

His daughter will also rent out a couple of rooms in her house when she gets it earning €10,000 per annum this is exempt under rent a room relief.

Comments welcome.
 
Just a comment from a parent regarding the potential lodgers. My son attends a playgroup once a week in a designated space of a home (has it's own entrance etc but connects to the house via the kitchen). I would not be comfortable with lodgers being in that home throughout the day, especially as there would be no garda clearance. I would be likely to look elsewhere for childcare services. Something to keep in mind!
 
I think, generally, people would not know how to position themselves to take advantage of less understood tax reliefs, exemptions and loopholes, or how to take full advantage of popular reliefs.

That is why those with the wherewithal engage the services of competent tax practioners.
 
dmos87 said:
Just a comment from a parent regarding the potential lodgers. My son attends a playgroup once a week in a designated space of a home (has it's own entrance etc but connects to the house via the kitchen). I would not be comfortable with lodgers being in that home throughout the day, especially as there would be no garda clearance. I would be likely to look elsewhere for childcare services. Something to keep in mind!
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Its a childminder business the daughter is looking at not the a playgroup so regulations very different to a preschool, she could just get the lodgers garda vetted and probably they would be out during day anyway...

id didnt realise though you could offer both schemes from the same house....
 
Sandals said:
Its a childminder business the daughter is looking at not the a playgroup so regulations very different to a preschool, she could just get the lodgers garda vetted and probably they would be out during day anyway...
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While it's not compulsory to apply for Garda Vetting to be a child minder, most conscientious Parents will insist on it anyway. I can't see every lodger who stays at the house consenting to be Garda Vetted. I would not consider any Child Minder who is not vetted.
 
I think Joe's main point is that it is possible to acquire assets worth E1,250,000 plus have a potential income of E40,000 through various tax reliefs, with not a euro of tax liability. Each of the reliefs he mentions are legit and quite beneficial to many, but when availed of in this hypothetical case "the daughter" would have no tax liability, despite large assets and good income.

It begs the question : should one person be permitted to avail of all the above reliefs and exemptions?

In answer to Joe's question as to whether AAM readers are aware....many, like myself, would be aware of the rent a room, childminding tax exemption, and threshold limits on inheritances etc and advantageous transfers of land but as another poster said , those who can afford tax advisers would be au fait with the type of situation as outlined.

The farming community would be acutely aware of how to lessen their tax liability as would the business community, generally. The waged and salaried have very few reliefs to claim. I guess there are statistics for the personal income tax paid by the farming community, business community, separate from employees in the general PAYE sector.
 
110quests said:
I guess there are statistics for the personal income tax paid by the farming community, business community, separate from employees in the general PAYE sector.
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Most farmers, and some business people, are also PAYE employees.
 
Joe

A great post, but it seems to me that your client is not exploiting all the grants and reliefs available.


A friend of mine who owns a farm has leased it and says that he is getting the "farmer's pension". Is that still available?

Could the daughter who gets the land, plant forestry on it? There should good grants available for that. Or would she be classified as a farmer?

Is REPS still on the go?

Brendan
 
The girl who got the 1m worth of land can also avail of 7 years CGT holiday on land acquired before 31/12/14. If she sold after 7 years for say 1.5m she'd be out the gate with the 500k gain tax free also.

Great little country!
 
As a by the way this isn't just about the farming community.

Say a doctor with a pile of cash to pass onto child buys agricultural land worth 2m and gifts it to child before 31/12/14, then child takes gift of 200k for CAT purposes, no tax assuming no prior gifts. Even with agricultural land prices at reasonably high levels there's a fair tax incentive to do something like this. A gift of 2m in cash will attract CAT of c. 600k.

After 31/12 there are changes coming into effect 're agricultural relief.
 
Is Joe trying to inform the farming community of many tax alleviation measures, or educate others as to how some citizens have considerable assets and income but are not tax liable.

Citizens who are landless or property less (apart from their home) have few reliefs against tax ....medical, union fees, limited private health ins etc. It is obvious that over time, measures that favour the self employed ie farmers, business people, have been made available to facilitate their tax load ?

If I were to transfer a €1,000,000 house (as non agriculture) to a daughter she would have to pay CAT on 750,000 Yes ? And she, being an enterprising lady, rents it out she would pay tax , PRSI etc, allowing for the general expenditure in renting. So there is quite a variation in how agricultural sector is treated as against the non agri ?

Is this what Joe is implying with his excellent scenario ?
 
“Daughter”, despite her considerable wealth, while expecting full use of public services, contributes precisely nothing to fund those services.
 
110quests said:
It is obvious that over time, measures that favour the self employed ie farmers, business people, have been made available to facilitate their tax load ?
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I often find that when someone starts a sentence with "obviously" , it is not at all obvious to me at least.

What are the measures which facilitate the tax loan of self-employed business people?

Are you referring to the additional 3% USC on self-employed income over €100,000?
Or maybe the fact that PAYE workers get a tax credit of €1,650 which directly reduces their tax by €1,650?

Brendan
 
Brendan Burgess said:
I often find that when someone starts a sentence with "obviously" , it is not at all obvious to me at least.

What are the measures which facilitate the tax loan of self-employed business people?

Are you referring to the additional 3% USC on self-employed income over €100,000?
Or maybe the fact that PAYE workers get a tax credit of €1,650 which directly reduces their tax by €1,650?

Brendan
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3% USC on S/E on over 100,000k is an extra burden on them, of course.

1,650 tax credit is advantageous to PAYE workers, but there are few other tax credits in recent years to the general body of tax payers.

What I am referring to is how business people, friends, casually admit the new car(not a business vehicle), a daughter's car, a son's apartment were all bought "through the business". They "leave all that to the accountant".

These are very advantageous purchases for the recipients, but I certainly don't understand how it works.
 
110quests said:
What I am referring to is how business people, friends, casually admit the new car(not a business vehicle), a daughter's car, a son's apartment were all bought "through the business". They "leave all that to the accountant".
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Very persuasive evidence alright.

(It is remarkably tax-inefficient to hold cars in a company, or to use, rent or dispose of a property owned through a corporate entity.)

110quests said:
These are very advantageous purchases for the recipients, but I certainly don't understand how it works.
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Nor do I and I've been an accountant for 26 years.
 
I will refrain from comment in the future as am ill informed.

I say what I hear, see, and read but need to do much study on many topics.
 
Guns N Roses said:
While it's not compulsory to apply for Garda Vetting to be a child minder, most conscientious Parents will insist on it anyway. I can't see every lodger who stays at the house consenting to be Garda Vetted. I would not consider any Child Minder who is not vetted.
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Childminding Ireland are currently on a countdown to all cm having Garda vetting to purchase insurance....all cm vol notified or hse notified must be garda vetted.

I recently asked an afterschool activity teacher if she Garda vetted and she said whats that?..
 
Sophrosyne said:
“Daughter”, despite her considerable wealth, while expecting full use of public services, contributes precisely nothing to fund those services.
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Property tax? Water charges? Road tax? VAT included in her spending?
 
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