Starting your journey as a young farmer can be a daunting experience but there are some excellent supports available to help you get off the ground, such as the Young Farmer Top Up and TAMS. Here, we discuss these supports along with the best land purchase tax options.
Stamp Duty
Stamp duty is payable on land transferred by deed, such as a gift from a parent to child, or land being bought on the open market. The current rate of stamp duty on agricultural land is 7.5% of the purchase price.
To obtain the stamp duty relief, the following conditions must be satisfied:
The farmer purchaser must be under 35 years at the date of purchase;
The farmer must have the Green Cert. If they don’t, there is the option to get the land transferred before they are 35, pay the stamp duty and then go for the Green Cert and claim a refund once they have obtained it;
The farmer must undertake to spend not less than 50% of their normal working time farming the land for five years from the date of the transfer. For those working a 40-hour week, this typically translates to 20 hours per week farming;
The farmer must have ‘My Farm, My Plan’ completed and certified by Teagasc prior to the date of the transfer.
As a general rule, the relief only applies where the land is transferred to a young trained farmer and his or her spouse.
Consequently, if land is bought, for example, in a farmer and his son’s name, stamp duty will apply at the rate of 7.5%. However, if the land is purchased in the son’s sole name, stamp duty will apply at the rate of 0%.
Gift/Inheritance Tax
The next item to consider is how the purchase is being funded. Let’s take for example, land that is costing €300,000. It is being bought in the son’s name; €200,000 is being borrowed while the parent has the other €100,000 in cash. If the parent gave the money to fund the purchase, it could be regarded as a straight cash gift to the son and would not be as tax efficient. This is because a child, niece or nephew can be gifted or inherit up to €335,000 before they incur gift/inheritance tax.
However, as the average family farm transfer well exceeds this value, typically a child that qualifies for either Agricultural Relief or Business Relief will be better off financially.
The benefit of availing of Agricultural Relief is that it reduces the taxable value of the gift/inheritance of agricultural property by 90%. So, taking our previous example, if the parent gave the gift of the cash to their son on condition that he invested it in agricultural property within two years of the date of the gift, and he satisfies the other conditions of Agricultural Relief, that gift of cash can qualify for the relief.
So instead of €100,000 being taken into account for gift tax, only €10,000 is taken into account. This means most of his tax-free amount is still available to shelter further gifts/ inheritances such as the family farm.
Young Farmer Top Up/National Reserve
A farmer has to have the Green Cert in order to claim the CIS-YF, more commonly referred to as the Young Farmer Top Up. This typically equates to a top up on entitlements of approximately €158 per hectare up to a maximum of 50 hectares, i.e. €7,900 per year for a maximum of five years. An important change from the last scheme was that once your name went on a herd number, it activated the five years in which to claim your top up.
However, you now can choose when to activate it to maximise payments, so long as you first claim it within five years of setting up as head of the holding. To claim entitlements under the national reserve, the land either has to have no entitlements or below the national average.
Registered Farm Partnership
and TAMS
Many parents/children wish to form Registered Farm Partnerships (RFP) to avail of double the TAMS grant, which would not be available in a joint herd number situation. Where an RFP contains one qualifying young farmer, grant aid will be paid at 60% on the first €90,000 and 40% on the remaining balance, typically on the next €70,000.
This 60% grant is also to be extended to female farmers between the ages of 40-66 years and both the qualifying young farmer and the qualifying woman farmer can qualify for the
60% grant rate. The application must be under the Women Farmers Scheme.
In summary, going back to the example of the farmer and his son, it would appear that the best option to maximise tax reliefs and subsidies is for the land to be purchased in the son’s name and thereafter, to farm the land with the son through a registered farm partnership.
Young Farmers Schemes with the Department of Agriculture
1. National Reserve for BISS Entitlements: No farm income limits apply anymore. Applications are made while submitting.
2. Young Farmers Top Up Scheme: Originally, €64 for the first 50 hectares, now increased to €158 from 2023. Claimable for five years from year of first application. Applications are made alongside BISS in May.
3. TAMS Scheme: Enhanced 60% per €80,000, moving to €90,000 threshold. Applicable for RFP, sole trader, or LTD, but a joint herd number does not qualify for the 60% ceiling.
Disclaimer: The information in this article is intended as a general guide only. While every care is taken to ensure accuracy of information contained in this article, Aisling Meehan, Agricultural Solicitors does not accept responsibility for errors or omissions howsoever arising.
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Starting your journey as a young farmer can be a daunting experience but there are some excellent supports available to help you get off the ground, such as the Young Farmer Top Up and TAMS. Here, we discuss these supports along with the best land purchase tax options.
Stamp Duty
Stamp duty is payable on land transferred by deed, such as a gift from a parent to child, or land being bought on the open market. The current rate of stamp duty on agricultural land is 7.5% of the purchase price.
To obtain the stamp duty relief, the following conditions must be satisfied:
The farmer purchaser must be under 35 years at the date of purchase;
The farmer must have the Green Cert. If they don’t, there is the option to get the land transferred before they are 35, pay the stamp duty and then go for the Green Cert and claim a refund once they have obtained it;
The farmer must undertake to spend not less than 50% of their normal working time farming the land for five years from the date of the transfer. For those working a 40-hour week, this typically translates to 20 hours per week farming;
The farmer must have ‘My Farm, My Plan’ completed and certified by Teagasc prior to the date of the transfer.
As a general rule, the relief only applies where the land is transferred to a young trained farmer and his or her spouse.
Consequently, if land is bought, for example, in a farmer and his son’s name, stamp duty will apply at the rate of 7.5%. However, if the land is purchased in the son’s sole name, stamp duty will apply at the rate of 0%.
Gift/Inheritance Tax
The next item to consider is how the purchase is being funded. Let’s take for example, land that is costing €300,000. It is being bought in the son’s name; €200,000 is being borrowed while the parent has the other €100,000 in cash. If the parent gave the money to fund the purchase, it could be regarded as a straight cash gift to the son and would not be as tax efficient. This is because a child, niece or nephew can be gifted or inherit up to €335,000 before they incur gift/inheritance tax.
However, as the average family farm transfer well exceeds this value, typically a child that qualifies for either Agricultural Relief or Business Relief will be better off financially.
The benefit of availing of Agricultural Relief is that it reduces the taxable value of the gift/inheritance of agricultural property by 90%. So, taking our previous example, if the parent gave the gift of the cash to their son on condition that he invested it in agricultural property within two years of the date of the gift, and he satisfies the other conditions of Agricultural Relief, that gift of cash can qualify for the relief.
So instead of €100,000 being taken into account for gift tax, only €10,000 is taken into account. This means most of his tax-free amount is still available to shelter further gifts/ inheritances such as the family farm.
Young Farmer Top Up/National Reserve
A farmer has to have the Green Cert in order to claim the CIS-YF, more commonly referred to as the Young Farmer Top Up. This typically equates to a top up on entitlements of approximately €158 per hectare up to a maximum of 50 hectares, i.e. €7,900 per year for a maximum of five years. An important change from the last scheme was that once your name went on a herd number, it activated the five years in which to claim your top up.
However, you now can choose when to activate it to maximise payments, so long as you first claim it within five years of setting up as head of the holding. To claim entitlements under the national reserve, the land either has to have no entitlements or below the national average.
Registered Farm Partnership
and TAMS
Many parents/children wish to form Registered Farm Partnerships (RFP) to avail of double the TAMS grant, which would not be available in a joint herd number situation. Where an RFP contains one qualifying young farmer, grant aid will be paid at 60% on the first €90,000 and 40% on the remaining balance, typically on the next €70,000.
This 60% grant is also to be extended to female farmers between the ages of 40-66 years and both the qualifying young farmer and the qualifying woman farmer can qualify for the
60% grant rate. The application must be under the Women Farmers Scheme.
In summary, going back to the example of the farmer and his son, it would appear that the best option to maximise tax reliefs and subsidies is for the land to be purchased in the son’s name and thereafter, to farm the land with the son through a registered farm partnership.
Young Farmers Schemes with the Department of Agriculture
1. National Reserve for BISS Entitlements: No farm income limits apply anymore. Applications are made while submitting.
2. Young Farmers Top Up Scheme: Originally, €64 for the first 50 hectares, now increased to €158 from 2023. Claimable for five years from year of first application. Applications are made alongside BISS in May.
3. TAMS Scheme: Enhanced 60% per €80,000, moving to €90,000 threshold. Applicable for RFP, sole trader, or LTD, but a joint herd number does not qualify for the 60% ceiling.
Disclaimer: The information in this article is intended as a general guide only. While every care is taken to ensure accuracy of information contained in this article, Aisling Meehan, Agricultural Solicitors does not accept responsibility for errors or omissions howsoever arising.
Read more
60% growth of employment for international financial services sector
Meet the Maker: Corrina Earlie
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