Wednesday, 7 November 2007
Tenancies in common and the repercussions with regard to capital gains tax affect several of my constituents. It is not uncommon for farmers at the point of succession to pass on their farms to two or more family members by way of a tenancy in common. Circumstances may change over time and joint ownership may need to be broken up for genuine reasons. There is a substantial liability to capital gains tax where such partnerships are dissolved, even if partners continue to farm a share of the original farm and the land in question is not disposed of.
In my constituency, two brothers inherited a farm from their father. He left them the farm as tenants in common in 1990. Some 17 years later the brothers have married and have families. They want to split the farm but the tenancy in common means they each own every blade of grass on the farm. They cannot split the farm and continue to farm it because the Revenue Commissioners deem this to represent each brother buying from the other. This involves a capital gains tax of €50,000 each, a penal tax which they cannot afford.
Capital gains tax is chargeable on gains arising from the disposal of assets other than any gain that arose prior to 6 April 1974. Any form of property, other than Irish currency, including an interest in property such as a lease, is an asset for capital gains tax purposes. In the case I have highlighted there is no disposal of assets. Capital gains tax should not apply.
This is an anomaly of which the IFA is aware. It affects many farms throughout the country. At a time when the farming way of life is not as common as it used to be we should try to assist our farmers. The IFA proposes that where joint ownerships of family farms are dissolved and jointly owned assets are divided and transferred to individual family owners, no chargeable gain should be subject to capital gains tax. I agree with this stance.
I ask the Minister for Finance to make provision in the budget to take account of the situation outlined. It is an unjust situation that penalises farmers trying to make an honest living and who are not trying to exploit loopholes in the tax system.
I have listened to the Deputy's case, which he put very well. However, there is a long tradition that the Minister for Finance does not comment on taxation matters in advance of the annual budget. My sympathies go out to the Deputy but I wonder why items such as this are selected for the Adjournment debate. The Deputy must wait four weeks to see if progress will be made on this issue.
The Tánaiste is sympathetic to the farming community and in his past three budgets he increased the capital gains tax retirement relief consideration threshold from €500,000 to €750,000. This exemption applies in the case of farmers aged 55 and over who dispose of their farms. In addition, where the disposal is to a child, there is no upper limit on the relief. This is a very generous provision which is aimed at enabling intergenerational transfers of family farms.
He also introduced a capital gains tax exemption in respect of farm land that was leased prior to disposal. This allows a farmer to qualify for retirement relief where he leases the land for up to 15 years prior to disposal, provided it is subsequently disposed of to his child.
In addition, the Tánaiste extended the relief from stamp duty for farm consolidation for a further two years to 30 June 2009 and also extended it to qualifying exchanges of land where only one farmer is consolidating his or her holding. He made changes to the stamp duty relief for young trained farmers and updated the education criteria and simplified the refunds procedure.
Changes were also made to the capital acquisitions tax agricultural relief in respect of off-farm principal private residences. Agricultural relief provides relief from capital acquisitions tax on 90% of the value of a gift or inheritance. To qualify, 80% of a farmer's total assets must be qualifying agricultural assets. This has been amended so that an individual can now offset borrowings on an off-farm principal private residence against the property's value for the purposes of the 80% test.
The Government continues to offer strong and sustained support to the agriculture sector. Support for the sector will continue at a very high level. Expenditure by the Department of Agriculture, Fisheries and Food is in the region of €3 billion per year. Farmers can plan for the future with the confidence that direct payments worth €1.3 billion per annum under the Common Agricultural Policy, CAP, are secure up to 2013 and that the EU will continue to be a strong supporter of rural development.
There is more material in this script, outlining the good things the Government has done for the farming industry. I cannot provide more information on the point made by Deputy Scanlon. We must wait until this night four weeks to see if the Tánaiste includes it in his budget. I understand the matter is known to the Department and lobby groups are highlighting it. I will convey to the Minister that the issue was raised.
I remind the Minister of State that the Deputy is entitled to raise the matter and it is not a matter to be disallowed. The Ceann Comhairle is perfectly within his rights to allow Deputy Scanlon to raise the matter, irrespective of what the reply might be.