Parents Transfer Land to Son who wants to pay gift

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Lethal83

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Hi,

My parents are going to transfer land to me before I reach 35. I would like to pay them a gift for this land. Possibly 1-2k an acre.

I dont want my parents paying capital gains tax. What is the best way of doing this? Would this affect their pension?

Plus, is it possible for me to get a loan to pay this gift as it is a gift?
 
You need to get professional advice.

There are 3 taxes involved:
1. Capital Gains tax, the value of the transfer will deemed to be the market value of the assets at the date of transfer. There is retirement relief to relieve this tax but there are certain requirements to be fulfilled.
2. Stamp duty, there will be stamp duty in the transfer but there is Young Trained Farmer Relief which can reduce this.
3. Capital acquisitions Tax, the gift less whatever you pay will be subject to CAT. There is agricultural relief available which may reduce this.
Get proper advice to ensure that you qualify for each of the reliefs and the tax should be minimal.
 
You don't give many details.

How many acres -what is true value per acre - are there other assets that you may inherit on their death...

The reason for these questions is that there are several points to consider, not least of which is that CGT is based on the true value of the land, not what they receive from you.

You won't pay any tax if value is under 225k . If value is,say, 300k then you pay tax on the extra 45k. But if you have given 50 already to them then you won't pay tax.

The value of any gift is deducted from the value of the inheritance for tax purposes.
If land is worth 225k then you'll pay tax if you inherit a house or other assets.
In other words you'll have wiped away the threshold limit of any inheritance.

(You can inherit a house tax free if you've been living there in the years prior to parents death and continue to live there - read the rules.
Also read the rules on transfer of agricultural land whether by gift or inheritance.)

There are so many rules relating to your subject that you must get full advice -and that can only be provided if all information is given by you.
 
Joe_90 said:
You need to get professional advice.

There are 3 taxes involved:
1. Capital Gains tax, the value of the transfer will deemed to be the market value of the assets at the date of transfer. There is retirement relief to relieve this tax but there are certain requirements to be fulfilled.
2. Stamp duty, there will be stamp duty in the transfer but there is Young Trained Farmer Relief which can reduce this.
3. Capital acquisitions Tax, the gift less whatever you pay will be subject to CAT. There is agricultural relief available which may reduce this.
Get proper advice to ensure that you qualify for each of the reliefs and the tax should be minimal.
Click to expand...

Thanks Joe. I am a young trained farmer thus should be exempt from stamp duty and CGT pending I get agricultural relief.

However, im more interested in how it would affect my parents. Im sure they would have to pay CGT. Thus, would I be better off doing a normal transfer from parent to son and saying no money exchanged hands.
Then, get a loan against the land and give it to my parents or make it available to my parents to use at will. Would a bank entertain it though?
 
Lethal83 said:
Thanks Joe. I am a young trained farmer thus should be exempt from stamp duty and CGT pending I get agricultural relief.

However, im more interested in how it would affect my parents. Im sure they would have to pay CGT. Thus, would I be better off doing a normal transfer from parent to son and saying no money exchanged hands.
Then, get a loan against the land and give it to my parents or make it available to my parents to use at will. Would a bank entertain it though?
Click to expand...

No, you're misunderstanding things - whether your parents give you the land or sell it to you at full market value is totally irrelevant. When an asset passes between connected persons, such as parents to a child, then it is deemed for CGT purposes to have been transferred at its open market value.

So you giving your parents a nominal amount for the land has no bearing on their CGT position.
 
mandelbrot said:
No, you're misunderstanding things - whether your parents give you the land or sell it to you at full market value is totally irrelevant. When an asset passes between connected persons, such as parents to a child, then it is deemed for CGT purposes to have been transferred at its open market value.

So you giving your parents a nominal amount for the land has no bearing on their CGT position.
Click to expand...

I recognise the asset will be subject to CGT but because I have the qualifications & subject to agricultural relief, then the tax payable should be minimal.

Im more concerned about my parents being subject to CGT, which to the best of my knowledge they will be unless there are reliefs or age allowances which I am not aware of.
 
Lethal83 said:
I recognise the asset will be subject to CGT but because I have the qualifications & subject to agricultural relief, then the tax payable should be minimal.

Im more concerned about my parents being subject to CGT, which to the best of my knowledge they will be unless there are reliefs or age allowances which I am not aware of.
Click to expand...

Sorry you still don't seem to be getting it - you are conflating CAT and CGT, two separate taxes.

Your parents are exposed to CGT on transferring the land to you, unless a relief applies. As I already said, this is the case regardless of whether you give them any money in return or not.

I think you need to be clearer on what question you want to ask...?
 
mandelbrot said:
Sorry you still don't seem to be getting it - you are conflating CAT and CGT, two separate taxes.

Your parents are exposed to CGT on transferring the land to you, unless a relief applies. As I already said, this is the case regardless of whether you give them any money in return or not.

I think you need to be clearer on what question you want to ask...?
Click to expand...

Apologies your correct.

Im surprised that you say my parents are subject to CGT regardless if money exchanges hands. How could they be exposed to CGT if they gained nothing, only losing an asset?
 
If you transfer property to a connected person then you transfer at market value. There are reliefs to reduce were your parents farming the land in the past?
 
If you transfer property to a connected person then you transfer at market value.
Click to expand...

Do you have to be a connected person for this to happen?

If I give a friend or even a stranger a present of some shares worth €100,000 - presumably I will pay CGT calculated at the market price?
 
The legislation only applies market value to connected persons S549. Remember that the gift will be subject to CAT with a minimal exemption so there would be tax payable.
 
Are we not missing a few fundamentals here:

Market Value 5/4/74
Indexation
Current Market Value
etc

to see if there is even a gain!

Would retirement relief apply here?
 
WizardDr said:
Are we not missing a few fundamentals here:

Market Value 5/4/74
Indexation
Current Market Value
etc

to see if there is even a gain!

Would retirement relief apply here?
Click to expand...

We sure are missing them, but since the OP hasn't deigned to give them to us we can only answer on the basis of the facts he's given!

He specifically asked about the consequences of his giving a "gift" (which would actually be viewed as consideration on an objective view of the transaction) in return for his parents transferring the land.

The answer to that is there is no consequence to that gift, as market value will be imposed on the transaction.

Any reliefs that can apply, will apply to that market value, regardless of the gift from the OP.

I'd suggest that it would be very unusual that there wouldn't be a gain from the parents' side, if it's been held for any substantial period of time - agri land prices have bounced back since 2010 AFAIK, and the average price achieved per acre in the last 2 years was ~€10k.

Agri land average price in 1974 was around £600 - so say €800 per acre. The max indexation factor is 7.528, which gives a base cost of €6k - €7k at best. Anyone arguing a higher base cost than this ballpark would have to able to make a fairly compelling case.

The OP had a duplicate thread (since deleted) where he indicated he believed retirement relief would apply, so I think the whole question is a moot point anyway.
 
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