For periods up to 31 December 2014 an individual aged 40 years or over, or an individual who is permanently incapacitated by mental or physical infirmity from carrying on a trade of farming, may be entitled to an exemption from income tax of certain income arising from leasing of farm land. With effect from 1 January 2015 the age restriction or the requirement to be permanently incapacitated were removed by the Finance Act 2014.
The income is assessed as normal under Case V of schedule D and the amount of the profit from the letting of farmland is included in the total from all lettings. The amount of the relief, (subject to the maximum limit) is allowed as a deduction in arriving at total income as follows:
Qualifying lease taken out from 1/1/2007 to 31/12/2014
- €20,000 where the lease / leases are for a term of at least 10 years
- €15,000 where the lease/ leases are for a term of at least 7 years
- €12,000 of annual leasing income where the lease/leases are for a term of at least 5 years
The farm land must be in the State.
Leases between close relatives do not qualify.
Qualifying lease is a lease of farm land which is in writing or evidenced in writing, is for a definite term of 5 years or more, and is made on an arm’s length basis between one or more qualifying lessors and one or more qualifying lessees.
The relief will not operate to create a loss.
The relevant exemption limit applies irrespective of the number of qualifying leases held.
Changes effective from 1 January 2015
Thresholds for exemption where qualifying lease is taken out on or after 1 January 2015
- €40,000 where all the qualifying leases are for 15 years or more,
- €30,000 where all the qualifying leases are for 10 but less than 15 years,
- €22,500 where all the qualifying leases are for 7 but less than 10 years, and
- €18,000 where all the qualifying leases are for 5 or 6 years.
Definition of qualifying lessee
A company may be an eligible lessee provided it is not connected with or controlled by the qualifying lessor(s).