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Backlash over stamp duty on sale of farms: Vast majority of farms will be hit with 6pc tax


Farmer saved €50k buying €1m farm on budget day

A view of the 18ac parcel of land for sale at Ardobireen near Golden in Co Tipperary1
A view of the 18ac parcel of land for sale at Ardobireen near Golden in Co Tipperary

Kevin Doyle and Margaret Donnelly

FINANCE Minister Paschal Donohoe is facing a major backlash after it emerged the massive hike to commercial stamp duty will apply to the sale of farmland.

Farm organisations and Opposition politicians believe the Government has failed to factor in the impact the move will have on rural Ireland.

However, Mr Donohoe has insisted there is “no intention of making anybody collateral damage”.

In his Budget the minister raised the stamp duty on commercial land transactions from 2pc to 6pc in a bid to raise €376m that will be used to fund social welfare increases and income tax reductions.

There was initial confusion within government as to whether this would directly impact the sale of farmland but Mr Donohoe has confirmed it will with the exception of inter-family sales and where the buyer is under 35 years of age.

As a result Kildare-based auctioneer Paddy Jordan told the Irish Independent the “vast majority” of farms sold will now be subject to the new higher rate of tax.

“We see some young farmers buying who will qualify for the 0pc relief and carry out valuations for inter-family transactions, but the vast majority of land sales are to people who do not qualify for such reliefs,” he said.

Mr Jordan sold a large farm for over €1.3m on Budget Day.

“The deal was signed before the Budget was passed and the buyer’s Stamp Duty will be over €20,000, but if the farmer had bought the land after the Budget, he would be facing a Stamp Duty bill in excess of €80,000,” Mr Jordan said.

Kilkenny-based auctioneer Joe Coogan said only one in five farms sold are to people who will be exempt from paying the increased stamp duty.

Independent TD Michael Fitzmaurice has claimed the move will cost farmers €12m. The Roscommon East/Galway TD said that he has been inundated with queries.

He also questioned what will happen transactions that haven’t yet been completed.

“I’ve had farmers on to me that are now facing an extra bill of €12,000 to €14,000 from the stamp duty increase,” he said.

Farming organisation Irish Creamery Milk Suppliers Association (ICMSA) said the imposition of a 6pc rate on farmland sales is a seriously retrograde step that will impact very negatively on those small and medium sized farmers trying to buy land to improve the viability of their farms into the future.

ICMSA President John Comer said that the decision to impose such a charge on a family farm buying even a small piece of land stands in very sharp contrast to the concession given to property developers whereby a developer will get a refund of the stamp duty if development commences within 30 months.

“We’ve a situation where developer spending millions buying land – and likely to make very substantial profits from house building – will qualify for a refund while a family farm perhaps buying a small piece of land and taking out a loan over maybe 20 years to pay for the land will be hit with a 6pc stamp duty rate with absolutely no refunds.”

Meanwhile questions have been raised about the assumption that the stamp duty change will actually bring in €376m next year.

Department of Finance sources told the Irish Independent the figure is “conservative”.

But John Heffernan, Tax Partner at EY Ireland, said: “Property transactions in the region of €9.4bn would be required in 2018 to produce a yield at this level. Commercial real estate investment in Ireland in 2016 was €4.5bn, less than half of the level of investment that would need to be made to reach that projection.

“Given that there was already significant investment in real estate in 2016, to assume a doubling of that level would be both over-optimistic and unsustainable.”