John Paul O'Shea (Cork North-West, Fine Gael)
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111. To ask the Minister for Finance if his Department will review the operation of the six year clawback rule under section 89(4) of the Capital Acquisitions Tax Consolidation Act 2003, in circumstances where an inheritor of agricultural property is unable, due to severe disability or long-term residential care needs, to farm the land or reinvest in agricultural property; if he will consider introducing a specific legislative exemption or waiver to prevent the clawback of agricultural relief in such exceptional cases; the analysis undertaken by his Department on the impact of the rule on families supporting persons with disabilities; and if he will make a statement on the matter. [68303/25]

Simon Harris (Wicklow, Fine Gael)
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It is Revenue’s understanding, based on the information provided, that the query relates to the operation of Capital Acquisitions Tax (CAT) agricultural relief in circumstances where the beneficiary of a gift or inheritance of agricultural property has a severe disability or long-term residential care needs.

Agricultural relief is provided for by section 89 of the Capital Acquisitions Tax Consolidation Act 2003. To qualify for the relief, a number of conditions must be met. These include the requirement that the beneficiary qualifies as an “active farmer” for 6 years from the valuation date of the gift or inheritance.

A beneficiary will qualify as an “active farmer” where they personally farm the agricultural property on a commercial basis and with a view to the realisation of profits, or where they lease the whole, or substantially the whole, of the agricultural property to a person who meets these conditions. Where the beneficiary or lessee does not hold an approved farming qualification, they must farm the land for at least 50% of their normal working time.

Therefore, in circumstances where a beneficiary is unable to farm agricultural land personally, they will be able to satisfy the active farmer requirement by leasing the land to someone who is in a position to meet these conditions.

The legislation provides for agricultural relief to be clawed back if, within 6 years of the valuation date of the gift or inheritance the agricultural property is sold and not replaced by other agricultural property, or if the agricultural property ceases to be actively farmed. Where there is a clawback of agricultural relief, CAT is recalculated on the gift or inheritance as though the asset to which the clawback relates were not agricultural property.

The policy intention for CAT Agricultural Relief is the allow for the intergenerational transfer of farmland for its continued active farming and there are no exemptions for the clawback provisions. The Capital Acquisitions Tax Consolidation Act (CATCA) 2003 does contain a number of exemptions from CAT which may be relevant in the circumstances outlined and these are set out below.

Section 84 CATCA 2003 provides an exemption from CAT for gifts and inheritances taken exclusively for the purpose of discharging qualifying expenses of an individual who is permanently incapacitated by reason of physical or mental infirmity. "Permanently incapacitated” in this context means being unable to support oneself by earning an income from working. Qualifying expenses mean expenses relating to medical care including the cost of maintenance in connection with such medical care.

Section 82(4) CATCA 2003 provides for an exemption from CAT for inheritances for support, maintenance and education, to a child of the disponer (i.e., the parent) of any age who, on the date of receipt, is permanently incapacitated by reason of physical or mental infirmity from maintaining himself or herself. In order for the exemption to apply, the beneficiary’s other parent must also be deceased at the date of the inheritance. The provision of such inheritance must be such as would have been part of the normal expenditure of the disponer, having regard to his or her financial circumstances immediately before the date of death.

The Capital Acquisitions Tax Consolidation Act (CATCA) 2003 along with all taxes are kept under review and any changes must be considered as part of the annual Budget and Finance Bill cycle.