Question: I understand that the law could be changing in terms of the conditional gifts element of Agricultural Relief. Could you explain how this would work in relation to a land purchase where a young farmer would purchase land using a gift received from a parent?
Was this removed in the last Budget or is it part of the changes that were postponed and could potentially be availed of in 2025?
Answer: This is a very timely query. The removal of this tax relief is subject to a commencement order which could be signed into law any day. The date the money is transferred is the key date for Agricultural Relief. Thereafter, the person has two years to invest the cash in agricultural property to avail of the relief. My general advice if you wish to avail of Agricultural Relief on a gift of cash is to give it before the tax relief is pulled.
What is conditional bequest?
Conditional bequest relates to a tax-efficient way of passing wealth from one generation to the next. Say for example a parent gives a gift of €1m to a child. The most that each child can get tax free from parents currently is €400,000. The excess €600,000 is subject to tax at 33%. So the child would have €198,000 to pay in tax on the €1m gift.
On the other hand, say for example the parent gives the cash to the child on condition that they invest the cash in agricultural property within two years. That cash could qualify for Agricultural Relief meaning that only 10% of the gift or €100,000 would be taken into account for tax.
However, as each child can get up to €400,000 tax free, it would mean that they pay zero in tax on the €1m gift with €300,000 left of their tax-free amount to shelter tax against further inheritances from parents. That’s quite the tax saving and unfortunately, it’s part of the reason it was open to being abused by non-farmers.
What are the conditions of
Agricultural Relief?
As well as investing in agricultural property within two years eg land, forestry, machinery, cattle etc, the person getting the money must also pass the 80% Farmer Test and the Active Farmer Test. Contrary to popular opinion, you do not need to have the Green Cert or even to farm to avail of Agricultural Relief.
The 80% Farmer Test is purely a financial test which states that 80% of the resources of the person getting the cash has to be made up of agricultural assets.
Using our previous example, if the agricultural assets were €1m, the person getting the cash could have up to €250,000 of non-agricultural assets and still pass the 80% Farmer Test. For example the child has a house worth €500,000 with a mortgage of €250,000 in joint names, thus their net equity is €125,000 of a non-agricultural asset. Savings, shares, car etc would also be taken into account but pensions are excluded.
The Active Farmer Test relates to the person getting the cash and investing in agricultural property, either farming that land for six years or leasing it to an active farmer for six years.
Timing of changes
These changes to Agricultural Relief were introduced in Budget 2025, which was signed into law on 12 November 2024. They remove the ability to gift cash to a person and avail of Agricultural Relief.
However, these changes are subject to a commencement order. This means that once the Minister for Finance signs this commencement order, you will no longer be able to avail of this tax efficient planning mechanism.
Another more alarming aspect of a change to Agricultural Relief relates to the person giving the gift or inheritance also having to pass the Active Farmer Test. Farming lobby groups have highlighted several scenarios where the proposed changes would have unintended consequences and catch genuine farming cases.
This was one of the reasons that the changes were postponed.
It is understood that Revenue is working through the various scenarios and will publish guidance on concessionary treatment to avoid genuine farming cases being caught by the proposed changes.
So it is important for any owners of land who are not actively farming their land or who have not leased it long-term to get advice to ensure that they are not caught out by the changes when they are signed into law.
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 and tax consultants does not accept responsibility for errors or omissions howsoever arising. E-mail aisling@agrisolicitors.ie
Read more
Key considerations when leasing out land
Am I liable for the debt of my deceased father?
Question: I understand that the law could be changing in terms of the conditional gifts element of Agricultural Relief. Could you explain how this would work in relation to a land purchase where a young farmer would purchase land using a gift received from a parent?
Was this removed in the last Budget or is it part of the changes that were postponed and could potentially be availed of in 2025?
Answer: This is a very timely query. The removal of this tax relief is subject to a commencement order which could be signed into law any day. The date the money is transferred is the key date for Agricultural Relief. Thereafter, the person has two years to invest the cash in agricultural property to avail of the relief. My general advice if you wish to avail of Agricultural Relief on a gift of cash is to give it before the tax relief is pulled.
What is conditional bequest?
Conditional bequest relates to a tax-efficient way of passing wealth from one generation to the next. Say for example a parent gives a gift of €1m to a child. The most that each child can get tax free from parents currently is €400,000. The excess €600,000 is subject to tax at 33%. So the child would have €198,000 to pay in tax on the €1m gift.
On the other hand, say for example the parent gives the cash to the child on condition that they invest the cash in agricultural property within two years. That cash could qualify for Agricultural Relief meaning that only 10% of the gift or €100,000 would be taken into account for tax.
However, as each child can get up to €400,000 tax free, it would mean that they pay zero in tax on the €1m gift with €300,000 left of their tax-free amount to shelter tax against further inheritances from parents. That’s quite the tax saving and unfortunately, it’s part of the reason it was open to being abused by non-farmers.
What are the conditions of
Agricultural Relief?
As well as investing in agricultural property within two years eg land, forestry, machinery, cattle etc, the person getting the money must also pass the 80% Farmer Test and the Active Farmer Test. Contrary to popular opinion, you do not need to have the Green Cert or even to farm to avail of Agricultural Relief.
The 80% Farmer Test is purely a financial test which states that 80% of the resources of the person getting the cash has to be made up of agricultural assets.
Using our previous example, if the agricultural assets were €1m, the person getting the cash could have up to €250,000 of non-agricultural assets and still pass the 80% Farmer Test. For example the child has a house worth €500,000 with a mortgage of €250,000 in joint names, thus their net equity is €125,000 of a non-agricultural asset. Savings, shares, car etc would also be taken into account but pensions are excluded.
The Active Farmer Test relates to the person getting the cash and investing in agricultural property, either farming that land for six years or leasing it to an active farmer for six years.
Timing of changes
These changes to Agricultural Relief were introduced in Budget 2025, which was signed into law on 12 November 2024. They remove the ability to gift cash to a person and avail of Agricultural Relief.
However, these changes are subject to a commencement order. This means that once the Minister for Finance signs this commencement order, you will no longer be able to avail of this tax efficient planning mechanism.
Another more alarming aspect of a change to Agricultural Relief relates to the person giving the gift or inheritance also having to pass the Active Farmer Test. Farming lobby groups have highlighted several scenarios where the proposed changes would have unintended consequences and catch genuine farming cases.
This was one of the reasons that the changes were postponed.
It is understood that Revenue is working through the various scenarios and will publish guidance on concessionary treatment to avoid genuine farming cases being caught by the proposed changes.
So it is important for any owners of land who are not actively farming their land or who have not leased it long-term to get advice to ensure that they are not caught out by the changes when they are signed into law.
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 and tax consultants does not accept responsibility for errors or omissions howsoever arising. E-mail aisling@agrisolicitors.ie
Read more
Key considerations when leasing out land
Am I liable for the debt of my deceased father?
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