Martin Heydon (Kildare South, Fine Gael)
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56. To ask the Minister for Finance if he will review the tax relief scheme for long term leases of agricultural land as it relates to inter family leases in order to consider if the allowance can be extended to inter family leases that were in place prior to the introduction of the tax relief scheme such as in a case (details supplied); and if he will make a statement on the matter. [47533/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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I am advised by Revenue that section 664 of the Taxes Consolidation Act 1997 provides relief from income tax for certain income from long-term leasing of agricultural land. The relief is available, subject to a maximum limit, where farm land is leased to a qualifying lessee for a period of 5 years or more. In order to qualify as a qualifying lessee for the purpose of the relief, the lessee must not be connected with the lessor, or with any of the lessors if there is more than one. The rules for establishing whether or not persons are connected are laid down by section 10 of the Taxes Consolidation Act 1997. Effectively, this means that a lessor is not entitled to relief where the land is let to family members or family members of their spouse or civil partner.

The policy behind this restriction is one of anti-avoidance, due to concerns that some may misuse the exemption. In addition, it was felt that allowing the tax exemption in cases where the land was leased to “connected persons” may delay succession or lead to the fragmentation of holdings. In an effort to avoid the misuse of the exemption and unintended consequences, it was decided to limit the eligibility of the tax exemption. The connected party restriction has applied since the introduction of the relief over 30 years ago.

While I understand there are cases caught by this restriction which are not seeking to abuse the scheme, the incentive was structured to take on board the usual anti-avoidance measures seen in much of the tax system. Without this provision the relief would be potentially open to abuse, e.g. the passing back to the lessee of rent on which tax relief had been claimed. This would not arise on arm’s length transactions.

It should be noted that there are already reliefs from stamp duty and capital acquisitions tax available in the case of permanent transfers of land between family members, such as by gift or sale. In Finance Act 2015 succession farm partnerships were introduced to assist succession planning and the transfer of farms between family members.