Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I thank the Senator for raising this matter. I apologise on behalf of the Minister for Finance who regrets that he is unable to be present owing to other business.

The matter raised relates to recent changes made to capital acquisitions tax, CAT, agricultural relief which applies to gifts or inheritances of agricultural property. In his 2014 Budget Statement the Minister announced that an agri-taxation review would be undertaken. The review was carried out last year and the report on the review was published in October in the context of budget preparations. A key objective of the review was to encourage improved productivity in farming. In this context, concerns arose that the definition of "farmer" for the purposes of CAT agricultural relief was not sufficiently robust to ensure the relief was only being availed of by active, productive farmers. There were also suggestions it was being used as a tax efficient inter-generational wealth transfer mechanism for non-family farms. To address these concerns and encourage improved productivity in farming, changes to CAT agricultural relief were provided for in the Finance Bill 2014, as published. However, issues were raised with the Minister by various interests about the changes to the definition of "farmer" contained in the Bill which were intended to target the relief at active farmers. Amendments were made to the definition on Committee Stage of the Bill with a view to addressing these concerns.

Following the passing of Finance Act 2014, in addition to the existing conditions, including the requirement that a farmer's agricultural property must comprise 80% by value of his or her total property at the valuation date, the following conditions also apply to gifts or inheritances of agricultural property taken on or after 1 January 2015 where the valuation date also falls on or after 1 January 2015.The beneficiary must farm the agricultural property for a period of not less than six years commencing on the valuation date or lease the agricultural property for a period of not less than six years commencing on the valuation date. In addition, the beneficiary, or the lessee where relevant, must have an agricultural qualification, that is, a qualification of the kind listed in Schedule 2, 2A or 2B of the Stamp Duties Consolidation Act 1999, or achieve an agricultural qualification, as I have defined above, within a period of four years commencing on the date of the gift or inheritance, or farm the agricultural property for not less than 50% of his or her normal working time. The agricultural property must also be farmed on a commercial basis and with a view to the realisation of profits - thus confining the relief to genuine farmers.

Given the varied nature of farming and the multiplicity of different circumstances, as discussed during the debate on the Finance Bill, that can arise, the Revenue Commissioners have published a comprehensive Guide to Farm Tax Measures in Finance Act 2014 which addresses the practical application of all of the farm tax measures introduced in this year's budget and Finance Act 2014. The Revenue guide is available on the Revenue Commissioners' website.

One particular issue of concern regarding the revised requirements for CAT agricultural relief relates to the requirement on farmers without farming qualifications to farm agricultural property for not less than 50% of their normal working time. In accordance with the guide, the Revenue Commissioners will accept for the purposes of this relief that "normal working time" approximates to 40 hours per week. This will enable farmers with off-farm employment to qualify for the relief provided they spend a minimum of 20 hours working per week, averaged over a year, on the farm. If a farmer can show that his or her "normal working time" is somewhat less than 40 hours a week, then the 50% requirement will be applied to the actual hours worked - subject to being able to show that the farm is farmed on a commercial basis and with a view to the realisation of profits.

The issue raised by Senator Reilly in regard to the diaspora and how Revenue will treat the case of an individual living and working abroad who has been left a farm and wants to farm it but cannot return immediately to do so is an important one. I am informed that this scenario is dealt with in the guide issued by the Revenue Commissioners in section 3.7, which states that, "where a beneficiary inherits agricultural property and intends to farm it but is genuinely unable to do so immediately from the valuation date of the inheritance because of work or other personal circumstances the relief will not be refused where the beneficiary otherwise fulfils the requirements of relief on taking up the farming". I hope that is the flexibility the Senator is looking for and which we discussed during the debate on the Finance Bill in this House.

The Minister for Finance indicated in the course of the various Stages of Finance Bill 2014 through the Oireachtas that the Revenue Commissioners would apply the legislation around CAT agricultural relief in a flexible manner. The guide published by Revenue, to which I have referred, has been widely welcomed by interested parties in the farming sector and represents a sensible, practical and flexible approach to the changes made to CAT agricultural relief in Finance Act 2014.