Anyone familiar with Agricultural Relief from Capital Acquisitions Tax will also be aware that agricultural value will cease to apply to land that is disposed of or compulsorily acquired within 6 years of the date of the gift or inheritance and is not replaced, within 1 year of the disposal or within 6 years of the compulsory acquisition, by other agricultural property. As Agricultural Relief is one of the more generous tax reliefs, the date those six years start and end is of significant importance.
The date from which the clawback period commences is the “date of gift” or the “date of inheritance” which in the normal course means the date the gift is given or in the case of an inheritance, the date of death. It is important to note that the six year clawback period is not associated with the “Valuation Date” of the gift or inheritance per se, unless, of course, the Valuation Date happens to coincide with the” date of gift” or “date of inheritance”.
Ascertaining the end date i.e. the date the agricultural property “is disposed of” is not as straightforward when it comes to the sale of farm land or buildings. One would have thought that the date the sale of such property completes (being the date the Vendor is paid the balance purchase monies) would be treated as the date of “disposal” for the purposes of assessing whether agricultural relief will be clawed back for the purposes of CAT and not the earlier date of the contract for sale. I would suggest that the ordinary meaning of the word “disposal” is the date the asset is sold i.e. bought and paid for. While the term “”disposal” for the purposes of CGT is specifically defined as the date of the contract for sale, it is noteworthy that the CGT provisions setting out that specific definition are expressed to relate solely to Capital Gains Tax. S. 542 of the Taxes Consolidation Act states “for the purposes of the Capital Gains Tax Acts, where an asset is disposed of and acquired under a contract, the time at which the disposal and acquisition is made shall be the time at which the contract is made”. One would have assumed that given that the CGT legislation went to the bother of defining the term “disposal” and stating that such definition only applies to CGT that it sought to distinguish its definition of “disposal” from the general and normal meaning of that term which I would suggest means the date the sale of the asset completes. Unlike the CGT provisions of the Taxes Consolidation Act, the distinct and separate legislation relating to CAT, being the Capital Acquisitions Tax Act does not define what “disposal” means. Having regard to the manner in which the CGT legislation restricts the use of its definition of “disposal” to CGT alone, it would not appear to be sound logic to borrow its definition for the purposes of CAT.
This matter came for consideration by the writer recently where an auction of land had been organised by a Vendor client for the day before the six year clawback period would expire but the sale would not have completed for some weeks afterwards. Having only been advised of the proposed auction date after it had been agreed with the Auctioneer, it was vital to be sure that the Revenue Commissioners would treat the date the sale completed as the date to which the clawback period would be counted. If so, it would be more than 6 years and no clawback would arise. The writer was surprised to learn that Revenue take the view that the date of the contract (in my case the date of the Auction assuming a contract would be signed on that day) is the date to which the six year clawback period is counted despite there being no clear legislative backing for this interpretation. The upshot was that the Auction was reorganised to occur after the 6 years had expired on the basis that it was the path of least resistance and brought certainty to what might otherwise have, in Revenue’s view, triggered a significant tax liability for my client under the clawback provisions.
CAT Agricultural Relief Clawback – “the date of disposal”
