Farm couple enjoy €137,914 tax victory over Revenue after land sale

There has been considerable media interest today in the victory of an unnamed married couple over the Revenue Commissioners in relation to a disputed Capital Gains Tax bill following their sale of farmland for €950,000.

The Tax Appeals Commission (TAC) ruled that a Revenue assessment of €137,915 for Capital Gains Tax (CGT) should be reduced to Nil, as they deemed both husband and wife to be each entitled to Retirement Relief against CGT on the land sale.

The effect of qualifying for Retirement Relief is that no CGT is charged on the sale.

In this case, the 20 acres of land were sold in 2005 for €950,000, and as it had been jointly owned, this equated to €475,000 for each spouse, crucially within the €500,000 threshold that then applied for claiming Retirement Relief on disposals to non-family members.

As both spouses were aged between 55 and 66 at date of sale in 2005, they each satisfied the age condition for Retirement Relief.

Another crucial condition for Retirement Relief is that the seller must have both owned the property in question for at least 10 years prior to sale, and crucially used it in the course of a farm or other trade throughout those 10 years.

This latter condition proved the most contentious in this case. The couple had purchased the land for IR£195,000 in 1991 so had clearly owned it for longer than 10 years but owing to ill-health and other factors, the nature of their farming enterprise had varied over that time.

Up to 2002, they had farmed deer on the land, an activity that had proven heavily loss-making, and in later years they had sold hay, silage and grass to a neighbouring farmer.

Revenue officials claimed at the TAC that this latter activity did not constitute farming but the adjudicating Commissioner rejected this argument in favour of the couple, whose identity was redacted in the recently-published determination of the case.

This verdict will give much solace to farmers who are contemplating retirement including the possible disposal of some or all of their farm lands.

A crucial aspect of Retirement Relief is that while it can be very valuable if you are eligible for it, the entire relief is lost if you fail to meet the qualifying conditions, including the obligation to farm the lands throughout the 10 years prior to disposal.

Obviously, this decision will help clarify what is and isn’t included under the definition of “farming” for this purpose, but there are aspects of the relief that can prove contentious in individual cases.

As always, if you’re interested in availing of Retirement Relief in relation to a farm or other business, it goes without saying that professional advice is absolutely essential, as even a minor failure to meet the qualifying conditions can have very expensive consequences.