The D4 farmers: How the rich are buying up land to avoid inheritance tax

Irish Times

6 days ago

In
west Cork
, there has been an influx of rich Dublin buyers in the area of late. 'It is a notable trend,' local agent Maeve McCarthy, of Charles McCarthy Estate Agents in Skibbereen, says.
But, rather than seek out a site with a view, or a beachfront holiday home, these buyers are coming with one purpose in mind – to reduce the
inheritance tax
their family will have to pay.
'High net worth families are purchasing agricultural land as a means of transferring wealth in a tax-efficient manner,' she says.
It's the latest wheeze dreamt up by tax advisers to help rich families reduce tax bills when passing on assets to the next generation.
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Availing of agricultural relief can mean a 90 per cent reduction in the taxable value of the asset. And not only that, but if the land is leased, subject to certain conditions, rental income can also be tax free.
While the Government has become wise to the unforeseen use of the relief, more restrictive measures announced in last October's budget have yet to come into play. Non-farming families still have time to make use of the relief before the changes are legislated for.
While restrictions might be warranted, long-time farmers are now struggling to make sense of the new regime and how it might hinder them from availing of the relief.
Tax relief
While inheritance tax thresholds apply for most Irish families, allowing assets worth up to €400,000 to be passed on tax free to each child, a different regime applies to the transfer of assets such as businesses and farms.
These are attractive, as the goal is to keep the assets intact rather than forcing the recipients to sell off land – for example, to settle a tax bill. Through agricultural relief, the taxable value of such property and land can fall by as much as 90 per cent.
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'It's a very important relief to have in place. Without that in place, tax-free thresholds wouldn't be sufficient [to keep farms intact],' says Kevin Connolly, financial management specialist with
Teagasc
.
McCarthy agrees that 'it's a tax-efficient way of passing on the land', giving an example of a farmholding of 100 acres. With current values of about €20,000 an acre for good land in the area, this farm could be worth about €1 million. If it qualifies for agricultural relief, its taxable value would be as low as €100,000.
Qualifying for the relief does require meeting certain tests.
First of all, the beneficiary must be an active farmer and have farmed the land for at least six years at the date of the gift or inheritance. However, this requirement can be overcome by leasing out the land to an active farmer.
Secondly, after the gift or inheritance is received by the beneficiary, at least 80 per cent of the total property value of their assets must constitute agricultural property.
Relief on
income tax
from leasing a farm is also attractive. For example, for a lease held for between five and seven years, income of up to €18,000 a year will be exempt from income tax. This increases to €40,000 a year for leases of 15 years and more.
Tax planning
As McCarthy notes, while the relief is 'commendable', given its aim of helping farmers keep farms within families and allowing them to transfer from parent to child in a tax-efficient manner, its use is not always in the spirit of the relief.
'It's an unintended consequence of good intentions,' she says.
'It has been a concern over a good number of years,' agrees Connolly. 'Wealthy non-farmers would potentially see land as a way of passing on wealth to the next generation.'
Tax advisory firm Warren and Partners, for example, states on its website that the 'relief can be utilised very efficiently as part of a wider inheritance tax planning exercise'.
Figures from Revenue show that 1,781 taxpayers made a claim for Capital Acquisitions Tax (CAT) agricultural relief in 2023 (the latest figures available) at a cost to the exchequer of €246.6 million. This is up substantially – by 55 per cent on a value basis – from 2019 when 1,413 claims were made, at a value of €158.6 million.
'Having non-farmers coming in and buying land for wealth transfers doesn't do any favours for the farming community,' says Connolly.
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It's one reason why land prices are increasing. 'They [high net worth individuals] are starting to have an impact on prices,' says McCarthy, noting that local and younger farmers are being priced out of the area.
'They [local farmers] will lease the land but will never end up owning it,' she says, adding that rental values have also increased substantially in the last 12 months.
According to the 2025 Teagasc/Society of Chartered Surveyors Ireland Agricultural Land Market Review and Outlook Report, average land rental prices are expected to increase by 7 per cent in 2025. In Munster, average rental prices are expected to rise by 8 per cent.
The role of investors is one reason cited for rising land values.
While there is a risk in buying land for CAT reasons – will it appreciate in value, or can it be leased? – Connolly says demand for agricultural land is high, particularly in areas where dairying is quite strong. 'It's the most profitable enterprise at the moment,' says Connolly. 'If land comes up for long-term lease near a dairy farm, you will have interest in it.'
Clampdown
In last October's budget, then minister for finance
Jack Chambers tightened eligibility for use of the regime
to 'safeguard agricultural relief for the genuine active farmer and the next generation of farmers'.
Noting that the relief 'is an important measure to allow our young people to pursue their lives on the family farm', the minister said 'agricultural land has increased in value above inflation, and it is difficult for genuine farmers to purchase the land they need for farming'.
To address issues of the relief being used 'as part of tax planning strategies by wealthy individuals', Mr Chambers said he would extend the six-year active farmer test to the person who provides the gift or inheritance.
This means that it's not just the person inheriting the land who will have to pass the active farmer's test, the person gifting it will have to too.
The person gifting the land will now have to show that they either have an agricultural qualification and have farmed the property on a commercial basis; or they have spent 50 per cent of their normal working time farming; or they have leased the land to someone who fulfils these requirements; or they have combined farming with leasing.
The change is expected to yield about €15 million on a full-year basis.
The regime has been tightened previously: for example, cash gifts, used to purchase farm land within two years, would have qualified for relief at one time, but this no longer applies.
Similarly, the lease exemption was tightened in the 2023 budget. You can no longer buy a farm and lease it immediately. You have to wait seven years before you can claim the tax-free income, although there are exemptions.
However, the commencement order required for these changes to take effect has yet to be announced.
Impact on farmers
In the meantime, farmers are left struggling with the uncertainty that now surrounds the relief.
'What was proposed caught people unawares in the farming community,' says Connolly, adding that the budget measures are 'quite a blunt instrument'. 'There are some angles to it that would catch out a genuine farm transfer.'
Marty Murphy, head of tax with
Irish Fiscal Advisory Council (Ifac)
, has counted 15 scenarios that could negatively impact farmers, including where life interests apply and where there is no formal lease.
He gives the example of a farmer who also works as a schoolteacher, and thus doesn't meet the 20 hours a week farming requirement, and the tax bill that can arise.
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Another issue is where a farmer has to go into a nursing home at short notice and there isn't time to agree a lease. The farmer may not fulfil the requirement for six years' active farming immediately ahead of transfer.
Farmers are now hoping the budget measures will be changed before they become law, to ensure their interests are protected. Murphy doesn't expect any change until this October's budget, but adds that rushing to get in ahead of any changes is not always practical.
'Succession is not something you can do over an afternoon coffee,' says Murphy. 'It's a very sensitive topic, and you need to have a very well co-ordinated plan.'
Nonetheless, for those who have been planning to get a succession plan in motion, his advice is: 'Don't delay, get transferring as quick as possible.'
The fear remains that, when introduced, the new regime will 'inadvertently catch genuine farm transfers in the net', says Connolly.
A spokeswoman for the Department of Finance says consultation and engagement with farmers and stakeholders 'to ensure that there are no unintended consequences in relation to these measures' is ongoing.
But will the changes still do what was originally planned? High net worth people have very good advisers – and very good advisers usually find ways around these things, says Connolly.