Minimising Inheritance Tax

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shej

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I am a public sector worker and I earned just under €60,000 last year (spouse also works in public sector - dont hold this against us!!!). My mother took over a 60 acre suckler farm after my father passed away a few years ago. She runs the farm with a neighbour and myself (I live over 60 miles away). She wants to sign over the farm to me in the coming months. By my own 'rough' calculations my liability would be €750,000 (farm value) minus exemption €330,000 = €420,000 x 25% CAT rate = a liability of €105,000.
A nice problem you will think, but to pay this I would have to sell the farm (farm in family for generations)

What are my options to minimise this? Can I declare as a farmer and avail of "agricultural relief"?
Any information would be helpful or do I need a specialist tax advisor?
 
shej said:
I am a public sector worker and I earned just under €60,000 last year (spouse also works in public sector - dont hold this against us!!!). My mother took over a 60 acre suckler farm after my father passed away a few years ago. She runs the farm with a neighbour and myself (I live over 60 miles away). She wants to sign over the farm to me in the coming months. By my own 'rough' calculations my liability would be €750,000 (farm value) minus exemption €330,000 = €420,000 x 25% CAT rate = a liability of €105,000.
A nice problem you will think, but to pay this I would have to sell the farm (farm in family for generations)

What are my options to minimise this? Can I declare as a farmer and avail of "agricultural relief"?
Any information would be helpful or do I need a specialist tax advisor?
Click to expand...

Agricultural relief is an asset based test.


If 80% or more of what you own plus what you are being given is agricultural property you will qualify for the relief. The relief cuts the value down by 90%, meaning that the land/stock would be now valued at 75000, therefore less than the threshold of 332000, therefore no CAT. There are conditions- like keeping it for 6 years etc.

So have a look at what you own, not what you earn. Value of PPR house less mortgage ( divided in two if held jointly), value of any other property, bank accounts, car etc.

BTW, you should also be wary of stamp duty- probably 3% unless you qualify for the young trained farmer relief and your mother should look into CGT- her accountant will advise.

Unless there is a reason you need to have the farm in your name now ( you're under 35 and qualify for the YTF stamp duty relief, you're wary the Agricultural Relief will be cut) also consider having your mother will the farm to you instead. Unfortunately no one has a crystal ball though so cannot say what reliefs would be available when your mother dies.
 
Thanks Vanilla for that,
Excellent information for myself to focus on, as I'm not a regular poster, what does BTW mean. I'm over 35 so wont qualify for YTF. In your last paragraph you said we should consider to wait until the farm is willed to me, would you know what the difference would be? My PPR would be valued at €400,000 less €250,000 mortgage, also have two investments properties which are valued at €400,000, though mortgage €650,000 jointly owned with wife, €50,000 cash in bank so even if 90% relief is reduced, at above figures should still be below threshold (i.e. assuming it stays the same, probably won't though!!) Could I transfer assets over to my wife if needed to bring me below threshold?
Thanks again, shej
 
The difference between inheriting the farm and being gifted it is mainly that there is no stamp duty or CGT on an inheritance. There is a small gift exemption of 3000 but it's a minimal saving.

Can you transfer assets out of your name into your wife's sole name in order to qualify? Yes, it seems you can- I have had clients who have been advised to do just that in order to qualify for agricultural relief but you should really go to a competent tax adviser to get some sound advice especially at this level of potential tax. You will also need the consent of the financial institutions who have a charge on the properties to do this.

One of the difficulties with waiting for an inheritance is that we don't have a crystal ball- we don't know what the threshold will be then, the rate of tax or what exemptions will or will not be available.
 
Thanks Vanilla again for the info,
I was looking at the revenue wesite in qualifying as a farmer (i.e. 80% or more of what you own plus what you are being given is agricultural property you will qualify for the relief). In my example above when calculating what you own, can negative equity losses be minused from your total, therby reducing the amount you own?

Thanks again, shej
 
shej, the only liabilities that can be used to reduce your asset values is the mortgage on your principal private residence. Mortgages on investment properties are not consdiered.
 
"Agricultural relief is an asset based test."...

So does that include one's pension assets?

Thanks

S.
 
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