Budget 2019 did not make major changes to the capital gains tax (CGT) regime.
The rate remains at 33% for most capital transactions, including transfer of farmland, and is the third highest CGT rate from the Organization for Economic Co-operation and Development (OECD).
Considering the high rate of CGT in Ireland, it is imperative to seek good tax advice before entering into most business transactions; including the incorporation of your sole proprietorship in agriculture; and the sale of agricultural land.
Although the CGT rate remains high, reliefs are available which, if used correctly, may eliminate or significantly reduce the effective CGT rate payable on these transactions.
At FDC Group, the team has decades of experience in handling such transactions, particularly in the field of farm gate sales and inter-family transfers of agricultural land, and will be able to guide you in order to significantly reduce your CGT load.
Capital gains tax and retirement relief
If you are 55 or older, you may be able to claim the relief when you dispose of some of your business or farm assets that you have owned and used for a period of at least 10 years.
Despite the name, you don’t have to opt out of the business to be eligible.
The exemption is unlimited on the transfer of certain business assets on transactions between parents and their children, when the parents are between 55 and 66 years old. A restriction of 3 million euros Asset value is taxed once the parents reach the age of 66.
With regard to sales to third parties of commercial / agricultural assets, the allowance is limited to € 750,000 of assets if the sale takes place when the taxpayer is aged 55 to 66, and reduced to 500,000 € thereafter.
Revised Assistance for Entrepreneurs (RER)
The revised contractor relief remains unchanged, allowing a reduced CGT rate of 10% on the disposal of certain business assets. However, it was disappointing to note that the lifetime restriction of € 1million in capital gains was not increased in the 2019 budget, given that the equivalent cap in the UK is £ 10million. .
Nevertheless, Entrepreneurs Relief remains a valuable relief, by reducing the CGT rate from 33% to 10% on transfers of business assets – including agricultural land.
Capital gains tax / Stamp duty relief
Regarding CGT and stamp duty relief for farm restructuring – which provides for CGT exemption and a reduced 1% stamp duty rate when land is sold and replaced with more land adapted, thus creating a more efficient farming operation – FDC notes that the period in which the initial sale / purchase takes place has not been extended.
Therefore, if you are considering such a restructuring, you must complete the initial sale / purchase of the land by December 31, 2020 and complete the restructuring within 24 months of the initial transaction.
Since no extension has been granted, time is running out now if you want to complete the restructuring and claim the valuable CGT exemption and avoid the 6% stamp duty rate.
FDC Group will be happy to advise you on any tax issues that arise, as well as advise you on the requirements of the agricultural consolidation certificate.
Tax on capital acquisitions (CAT)
Apart from raising the threshold for class A from € 310,000 to € 320,000, there has been no significant change in the acquisition tax regime; all major reliefs remain unchanged for the moment.
Again, CAT’s 33% rate remains – which means it’s vitally important to factor in major reliefs, including farm aid and business aid, when considering the transfer of your farm or business.
With proper tax planning, existing allowances can provide for the transfer of up to € 3.2 million of farm / business assets to each child Beneficiary.
FDC has the knowledge and expertise to help you transfer your farm or business to the next generation in a tax-efficient manner and can assist you with all aspects of the transfer.
The main topic of discussion in Budget 2019 was increasing the stamp duty from 2% to 6% on commercial transport. However, in the case of agricultural land, the scope of inbreeding relief has been broadened, meaning that most inter-family land transfers could benefit from a reduced rate of 1% when the transfer takes place at most. late December 31, 2020.
This deadline has not been extended in this budget.
Therefore, FDC encourages you to consider inheriting your farm as soon as possible, as this valuable relief may not be available beyond 2020.
It is also disappointing that the relief has not been extended to other agro-industries and businesses in general.
It was, however, nice to see that the stamp duty relief for young trained farmers – which exempts some trained farmers aged 35 or under from the stamp duty on the donation or purchase of farmland – has been extended from three years, until December 31, 2021. To find out more about the FDC Group, click here