AGRICULTRUAL LEASE

I own a large farm and I currently all of my land on a short term basis to a neighbouring farmer. He recently approached me and asked me to enter into a longer term lease with him. Are there any tax advantages of entering into a longer term lease agreement? Please advise me.

Tax rules were amended in recent years in an attempt to encourage farmers to lease their lands on a long term basis to other active farmers. Land leasing occurs when a land owner (Lessor) leases his land to another active farmer (Lessee).

I understand that tax measures were introduced in recent years whereby a land owner would be exempt from income tax on lease rental income to up various exemption limits. The lease term and the maximum tax exemption limits are as follows:

• 5 to 7 year lease: up to €18,000 rental income per year;

• 7 to 10 year lease: up to €22,500 rental income per year;

• 10 to 15 year lease: up to €30,000 rental income per year;

• 15 year plus lease: up to €40,000 rental income per year.

The rental income eligible can include income from both land and agricultural entitlements. The lease must be in writing and stamped by Revenue Commissioners in order for the Lessor to avail of the enhanced income tax incentives.

The tax reliefs do not apply to leases to a spouse/son/daughter/sibling but are applicable on leases to a niece or nephew. The rental income up to each threshold is income tax exempt but the universal social charge (USC) and PRSI still applied on this lease income. Leases for five years or longer will now be exempt from stamp duty.

The lease agreement should at the very least include details on the length of the lease, the annual rent and payment procedure, details of the land use and the upkeep of the land, insurance details and treatment of Basic Payment Entitlements. I would recommend that you engage a solicitor to advise you and draft the lease

This column is prepared by Dolores Gacquin, Solicitor. Byrne Carolan Cunningham have offices in Athlone, Moate, Lanesborough and Galway.

A person should always contact their solicitor to obtain legal advice specific to their own situation. The above column contains general information and cannot be relied upon as legal advice. * In contentious business, a solicitor may not calculate fees or other charges as a percentage or proportion of any award or settlement