Two new tax reliefs for farmers come into effect this summer. From July, you can apply for stamp duty relief on long term leases and from August, relief will be available for farm consolidations. These are potentially valuable reliefs however there are conditions to meet and the timing of transactions is important.
Long Term Leases
Stamp Duty Relief for long-term leases came into effect on 1 July 2018. This is a full relief on the Stamp Duty payable on long-term leases of farmland.
The main conditions that must be satisfied are:
The term of a lease must be for a period of not less than 6 years and not more than 35 years.
The land must be used exclusively for farming carried on by the lessee.
The land must be farmed on a commercial basis and with a view to the realisation of profits – thus confining the relief to genuine farmers.
The lease may be to an individual, a partnership or a company and the lessee must either have an agricultural qualification or farm the land for not less than 50% of his or her normal working time.
Stamp duty that would, but for this relief, have been chargeable on the grant of the lease, becomes payable with interest if the conditions of the relief are not fulfilled for the first 6 years of a lease.
Farm Consolidation Relief allows for a stamp duty rate of 1 percent (instead of the general rate of 6 percent) where transactions qualify for a Farm Restructuring Certificate for the purposes of Capital Gains Tax Relief on Farm Restructuring. The relief applies to transfers of agricultural land executed on or after 1 January 2018 and on or before 31 December 2020. To qualify, the farmer must sell and buy land in order to consolidate their farm holding.
Where there is a purchase and sale of land within 24 months of each other that satisfy the conditions of consolidation, then stamp duty will only be paid to the extent that the value of the land that is purchased exceeds the value of the land that is sold. In such a situation stamp duty will only apply at the rate of 1 percent on the excess. In addition both the purchase and sale must occur between 1 January 2018 and 31 December 2020.
Other conditions that must be satisfied include:
There must be a valid consolidation certificate issued by Teagasc in relation to the purchase and sale of land, occurring within 24 months of each other.
The purchaser or purchasers must retain ownership of the land for a period of five years.
The conveyance must contain a certificate stating that the purchaser is entitled to the relief
Farm Consolidation Relief can be clawed back if the land is disposed of within five years of the date the claim for relief was made.
The purpose of these new stamp duty reliefs is to support sustainable rural development and promote the productive use of farmland. As is always the case with tax reliefs, it is important to understand the conditions and to pay attention to the timing of any planned transactions. Your accountant can provide more information to help you understand the new reliefs and how your farm business can benefit from them.