Paul Kehoe (Wexford, Fine Gael)
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92. To ask the Minister for Finance if a person (details supplied) will be liable for a clawback of agricultural relief in respect of inheritance tax; and if he will make a statement on the matter. [29661/16]

Michael Noonan (Limerick City, Fine Gael)
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I am advised by Revenue that gifts and inheritances of agricultural property, including land, qualify for relief (known as 'agricultural relief') from the payment of Capital Acquisitions Tax (CAT) once certain conditions are satisfied. Section 89 of the Capital Acquisitions Tax Consolidation Act (CATCA) 2003 provides for 'agricultural relief'. The relief takes the form of a 90% reduction in the taxable market value of the gifted or inherited agricultural property.

The person taking the gift or inheritance (the 'beneficiary') of the agricultural property must qualify as a 'farmer' for the purpose of section 89 CATCA 2003. This means that a beneficiary's agricultural property must comprise at least 80% by gross market value of the beneficiary's total property at a particular date. Revenue take the view that land on which solar panels are installed is not agricultural property for the purpose of establishing whether or not a beneficiary satisfies this '80%' test. Thus, depending on the amount of an individual's land that is actually occupied by solar panels, the use of agricultural land for solar panels may result in a beneficiary's failure to satisfy the '80%' test and to qualify for agricultural relief.

Prior to 1 January 2015, the availability of agricultural relief was essentially determined by the proportion of a beneficiary's overall property/assets that was accounted for by agricultural property following a gift or inheritance, i.e. the '80%' test as described in the preceding paragraph. Arising from recommendations made as part of the Agri-Taxation Review in late 2014, additional measures were introduced to ensure the productive use of 'tax-relieved' farmland.

A condition for agricultural relief that applies in relation to gifts and inheritances taken on or after 1 January 2015 is that a beneficiary, or a lessee where the beneficiary leases the agricultural land, must actually farm the land for a period of at least 6 years after taking the gift or inheritance. As it would not generally be possible to farm any part of the land occupied by solar panels, the change in the use of land from farming to the generation of solar energy within the required 6-year period would result in a withdrawal of some, or all, of any agricultural relief that had been granted, depending on how much of the land is diverted to this alternative use.

It is not clear from the details supplied by the Deputy whether the inheritance was taken before or after 1 January 2015 when some of the conditions for agricultural relief were changed. Where a beneficiary took an inheritance of agricultural property prior to 1 January 2015 and in respect of which that beneficiary satisfied the 'farmer' test on the taking of the inheritance, a clawback of the relief would occur only where the agricultural property was sold or compulsorily acquired in whole or in part within  6 years of taking the inheritance and where the proceeds were not re-invested in agricultural property within a year of the sale or within 6 years of the compulsory acquisition. The leasing of the land for an alternative use during the 6-year period would not result in a clawback for inheritances that pre date 1 January 2015. However, there would be a full or partial clawback of the relief where land was leased for an alternative use for inheritances that are taken after this date.

Any land that is purchased or leased after an inheritance is taken does not form part of the original inheritance and is not taken into account in establishing whether or not a beneficiary qualifies for agricultural relief or continues to be entitled to the relief.