Written answers

Tuesday, 15 April 2014

Photo of Charlie McConalogueCharlie McConalogue (Donegal North East, Fianna Fail)
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194. To ask the Minister for Finance if he will provide details of the tax implications on a transaction which involves two farmers swapping small parcels of land without any financial compensation; and if he will make a statement on the matter. [17697/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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An exchange of land constitutes a disposal of an asset for capital gains tax purposes. Each party to the exchange is ordinarily liable to capital gains tax on any chargeable gain in respect of the disposal. Land which is exchanged for no financial compensation, is treated as if it has been disposed of for its market value on the date of the disposal. The first €1,270 of chargeable gains in any tax year is exempt from capital gains tax. Where the gains exceed that amount, capital gains tax will only be charged on the amount in excess of €1,270. The current rate of capital gains tax is 33%.

I made provision in Budget 2013 for the following measure designed to assist farmers with consolidation of farm land. This measure followed on from measures in the previous year's Budget which also supported farm expansion and the transfer of land. Section 48 of Finance Act 2013 provides for relief from capital gains tax on disposals of farm land for farm restructuring, subject to a Commencement Order, which I made on 6 June 2013. The relief applies to a sale, purchase or exchange of agricultural land in the period from 1 January 2013 to 31 December 2015 where Teagasc has certified that a sale and purchase or an exchange of agricultural land was made for farm restructuring purposes. The initial sale or purchase, or the exchange, must occur in the period from 1 January 2013 to 31 December 2015 and the subsequent sale or purchase must occur within 24 months of that sale or purchase. Full relief from capital gains tax will be given where the consideration for the purchase (or the market value of the land exchanged) is equal to or exceeds the consideration for the sale (or the market value of the other land that is exchanged).

Where the consideration for the purchase (or the market value of the land exchanged) is less than the consideration for the land that is sold (or the market value of the other land that is exchanged), relief will be given in the same proportion that the consideration for the land that is purchased or exchanged bears to the consideration for the land that is sold (or the market value of the other land that is exchanged).

In summary, provided an exchange of agricultural land takes place in the years 2013 to 2015, each parcel of land is of equal value and Teagasc has certified that the exchange was made for farm restructuring purposes, no capital gains tax will arise. Provision is made for the clawback of the relief where qualifying land in respect of which relief has been given is disposed of within 5 years of the date of the purchase or exchange of that land. A clawback does not apply where the disposal arises under a compulsory purchase order. An instrument giving effect to an exchange of land is liable to stamp duty at the rate of 2% on the value of each of the parcels of land exchanged.

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