Retirement relief land

[diceyreilly]

I inherited a 5 acre plot of land in 2014(11years ago) as part of a larger plot 20 acres which 3 siblings inherited the remaining equally. The land has been let since 2014 for grazing & hay meadow.
My siblings may want to buy my section of the 20acres.
My query is I am 65 and could the proceeds qualify for farm retirement relief as it has been in agricultural use (rented) and will remain so for the future.
OR Could this be transferred as a gift sibling to sibling & proceeds treated in the same way to avail of €40k (exemption). Thanks in advance for any advice info or alternative.

 

[AAAContributor]

I think you may be referring to two different tax heads (CGT & CAT) above.

My siblings may want to buy my section of the 20acres.
My query is I am 65 and could the proceeds qualify for farm retirement relief as it has been in agricultural use (rented) and will remain so for the future.

This suggests that you will be making a disposal of the asset (farmland) and so the tax head that will concern you will relate to your capital gain - Capital Gains Tax (CGT) - and any reliefs sought thereon would be CGT reliefs (i.e. such as retirement relief).

Farmland is a "chargeable business asset" - an "asset used for the purposes of farming."

The question is, whether, given the circumstances you outline above, the asset meets the definition of "qualifying assets" in Section 598(1) TCA 1997.

Farmland that is let can qualify for retirement relief. However, the provisions in Sect 598(1) relating to leased land mention that at some point during the ownership period: "the land was......used for the purposes of farming carried on by the individual for a period of not less than 10 years."

Thus, the lessor needs to have actually farmed the land themselves for ten years. As you have never farmed the land (it was inherited and let for the full period of ownership), it would seem that the asset is not a qualifying asset.

OR Could this be transferred as a gift sibling to sibling & proceeds treated in the same way to avail of €40k (exemption).

I think the exemption you are referring to here is the Group B Capital Acquisitions Tax (CAT) tax free threshold of €40,000 (that would apply to a gift from sibling-to-sibling). CAT is a tax that concerns the beneficiary of your gift. The CAT tax free threshold does not apply to (your) capital gains.

If you make a gift to your sibling(s) (and even though you may receive zero consideration for the transaction), you are still making a disposal and deemed to receive proceeds amounting to the market value of the asset for capital gains tax purposes.

As such, you will still have to consider the Capital Gains Tax head, and whether you are entitled to any relief.

It's worth noting that there is an interaction between CGT & CAT to the extent that if a charge to CGT & CAT arises on the same event, then Section 104 CATCA 2003 provides for any capital gains tax paid to be credited against the CAT payable.