In his Budget 2025 speech on 1 October, the Minister for Finance caused consternation within the agricultural community by announcing a major change to agricultural relief in that the relief was being amended to target the actual active farmer.

Many focused on actual farming as opposed to looking at either leasing to active farmer or farming or a combination of both.

The Finance Bill this week introduces a new provision on agricultural relief to apply to gifts and inheritances taken on or after 1 January 2025 and, based on the legislation published, it is practical and achievable.

Up to now the conditions for agricultural relief applied to the beneficiary, but as and from 1 January 2025 the person handing over the property must meet new conditions.

The new provision now introduces additional requirements for the disponer (the person giving the property):

  • For the six years before the gift or inheritance the disponer must have owned the property, and
  • Held a specified farming qualification and used the agricultural property for the purposes of farming on a commercial basis.
  • Spent more than 50% of their working time using agricultural property (including the property comprised in the gift/inheritance) for the purposes of farming, or
  • Have leased the agricultural property to a person who satisfied either of these requirements.
  • The disponer is also permitted to have satisfied the active farmer test for different parts of the agricultural land through a combination of the requirements set out above.

    • The new requirements are being phased in from 1 January 2025 onwards, with the full six-year holding requirement taking effect for gift and inheritances after 1 January 2031. The gift or inheritance conditions remain for the beneficiary, the person receiving the land:

  • Must have ‘qualifying’ agricultural property;
  • At least 80% of the gross assets of the beneficiary must comprise agricultural property;
  • The assets must be retained by the beneficiary for six years after the gift or inheritance otherwise a clawback of the relief will arise.

    • The beneficiary must be an ‘active farmer’ for six years after the gift or inheritance

    The relief continues to provide a 90% reduction in the market value of the assets for capital acquisitions tax purposes.

    The beneficiary must be an ‘active farmer’ for six years after the gift or inheritance. This includes holding an agricultural qualification and farming commercially or spending not less than 50% of one’s time farming, or lease to an active farmer.

    A significant positive change to the section is that the beneficiary can now satisfy the active farmer requirement by a combination of leasing and farming.

    Major change

    A major change to the provision is that it does not permit a gift of cash to a beneficiary, on condition that the sums are invested in agricultural property to qualify for relief.

    While somewhat more restrictive than before, the new conditions should ensure agricultural relief is more targeted to active farmers than before.

    With the new six-year ownership requirement business relief remains an option for an active farmer who has bought land within the six-year holding period.