There are a number of conditions that you must satisfy in order to claim agricultural relief.
1. The property must fall within the definition of agricultural property. There is a detailed definition and it covers more than physical land, including buildings, machinery and livestock.
2. A benefit received subject to the condition that it be invested in agricultural property will be deemed to qualify as agricultural property if the investment in agricultural property is made within 2 years after the date of the benefit. In such circumstances the time period of 6 years for the conditions will run from the date of investment in the agricultural property.
3. The agricultural property must be situate in Ireland or within the European Union.
4. You must meet a farmer test, this is a mathematical test based on the gross market value of your worldwide assets (a deduction is permitted for a mortgage on an off farm dwelling in certain circumstances). The farmer asset test that you must meet is that 80% of your worldwide assets must comprise agricultural property after getting the gift or inheritance.
5. The farmer test is calculated on the valuation date so there may be opportunity to plan so that you meet the farmer test.
6. You must be an active farmer for 6 years after you get the gift or inheritance of agricultural property or you must lease the land to a person who is an active farmer for the 6 year period.
7. An active farmer is a person with a formal agricultural qualification (these are listed in legislation) or if you do not hold one of the formal agricultural qualifications you must spend 50% of your normal working time farming agricultural property.
8. The agricultural property must be farmed on a commercial basis with a view to profit.
9. You have to hold onto the property for the relevant time period.
10. You must not sell the agricultural property for a 6 year period (if you do, you have a short opportunity to reinvest the proceeds in agricultural property).
11. The 6 year period is extended to 10 years if you sell the agricultural property for development land purposes.
12. If you breach conditions 6 to 11 the 90% tax free relief is lost and you must pay any extra gift or inheritance tax at that time. This is the claw back of the relief.
13. To claim agricultural relief you must file a capital acquisition tax form with the Revenue Commissioners.
14. Always check to see if you may qualify for additional gift or inheritance tax reliefs – for example you may qualify as a favourite niece/nephew and obtain a greater tax free amount or you may also obtain a dwellinghouse and qualify for dwellinghouse relief.
Please contact us if you would like to discuss planning for your future.