Laois farmers hit by huge inheritance tax bills if farm left to nieces and nephews

inheriting an Irish farm may mean paying a huge tax bill, if left to a niece or nephew, but a Laois councillor is urging a change of inheritance tax laws.

Cllr Conor Bergin is calling for a review to protect succession of family farms and rural businesses.

He tabled a motion to the February meeting of Laois County Council, asking Minister for Finance, his Fine Gael colleague, Tánaiste Simon Harris, to review the Capital Acquisitions Tax (CAT) on farms, so it it doesn't cause forced sales or financial pressure.

"In Laois and anywhere in the country, when a family farm is transferred to the next generation, be it through death or a transfer, the rules should help continuity and not force people to have a large tax bill.

"At the moment inheritance tax is 33% above the threshold of €400,000 for a parent to child. That has increased, it was €333,000. It's €40,000 for nieces and nephews. I see this every day of the week in my solicitor's practice. There's loads of cases where nieces or nephews are in some case the same as a son or daughter, where people mightn't have children of their own. 

"You have agricultural relief which reduces the taxable assets of the farm by 90%. Works great if you have proper tax planning done in advance. In cases where maybe there's no will or someone dies without a will or proper tax planning, it can work out a lot trickier if the successor works off the farm.

"To get that 90% reduction, you have to be in a situation when you receive the farm, that 80% of what you own, your cash, house everything, has to be in the agricultural property. You have to time it very well. If there isn't proper planning people can still incur a large tax liability. 

"Family farms are family businesses. When they are transferred to the next generation, the question is who should get the most benefit from it, the family or person inheriting it, or the state.

"In many cases they are modest farms. The price of agricultural land in Laois is increasing the whole time. As any farmer will tell you, the value of the land often doesn't reflect the value of the business. We need a policy that keeps people on the land, keeps businesses alive, and keeps communities strong," said Cllr Bergin, who represents the Borris-in-Ossory Mountmellick Municipal District.

Cllr Paddy Buggy seconded the motion.

"We are probably into the fourth generation of landowners since the foundation of the state. In a lot of small farms, there is no direct heir, it will be a niece or a nephew that will take over that farm. 

"In reality that young person will have an off-farm income. How else will they be able to survive? So when they come to inherit, the tax bill is going to be so high that instead of being able to hold onto the farm, they have to sell off some of it to pay the taxes. I don't think that's fair. A lot of agricultural land in this county is now making between €15,000 to €20,000 an acre. It bears no resemblance to the income you'll generate from that farm. 

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"If we don't do something about it, by the next generation, there'll be only a handful of farmers holding huge vast estates of land. That would be hugely disappointing that a little over a hundred years since independence, we'll have gone back to that.

"It's not as if you're going to put the money in your back pocket. When you inherit a farm it's more like getting a liability than a gift at this stage," Cllr Buggy said. 

Cllr Ollie Clooney said that "land is increasing in price because we're not making any more of it".

"It's a tool to do your work. if you do incur this tax, you won't have the income to pay it and the bank will tell us to sell half or whole thing. We had landlords here before, thank god we got rid of them but we are heading back that way. If a bit of land goes up, its not the small man that buys it.

"It's great to see young people taking it up, this is going to be a big burden if we don't do something," he said.

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Cllr John King agrees.

"Farmers will make wills but will not do the paperwork. My advice to young people is become a farmer first then get your job after. A farm could make close to a million, and you could have the asset but you mightn't have the price of a loaf of bread.

"If you get word from your uncle you're being left land, you'd get excited for a few days then when realise what you have to pay you're better off if you didn't get it," Cllr King said.