Land grab by wealthy to avoid tax ‘forcing farmers off land’

Farmers are being forced off the land due to a tax loophole being used by wealthy families to avoid large inheritance tax bills.

When families pass money on to the next generation, they must pay inheritance tax.

To avoid this, many are now investing in land instead so they can use a relief that significantly reduces their tax liability.

Agriculture relief allows the beneficiary to reduce the value of the inheritance of farm-related property by 90% of its value for the purposes of calculating inheritance tax.

The rule was brought in to help stop farmer families from losing their homes and land to pay inheritance tax.

But now wealthy families are exploiting the loophole – raising the cost of farmland and pricing out younger people who wish to farm the land as a result.

Land agent Michael Brady told RTÉ’s Countrywide: ‘There are somewhere between 2,000 and 3,000 land transactions every year. So it’s a very small percentage of landowners or farmers who actually buy land. Full-time commercial farmers are our top of the tree. Dairy farmers are very often touted as the ones that are buying up all the land – that’s not necessarily true in all areas.

‘Next in line would be part-time farmers. Then you have cash-rich tax investors that are buying. Taxes are a big driver of land for large plots of land in general.

‘Over the last couple years, when interest rates were low, some business people invested in land. There’s land, and businesses are an efficient way to transfer wealth, we’ll say cash, from one generation to the next.

‘If you take somebody living in a three-bed in Dublin or Cork or Limerick, and you want to give some cash to your children, the limit is I think €335,000 for capital acquisitions tax and there’s a special relief called agriculture relief for farmland and for farms.’

The average value of non-residential agricultural land in 2023 was almost €9,300 an acre – up 11% from nearly €8,400 an acre in 2022.

The national average for good land was €12,308 an acre – up 10% from €11,172 in 2022, with the national average poor quality land reported at €6,286 per acre – up 13% from €5,564 in 2022.

The Teagasc Agricultural Land Market Review 2024 suggests farmland values will rise by 6% in 2024. Average land values in 2023 for good quality and poor quality land were €12,308 and €6,286 per acre respectively.

This represents a percentage change for the year of 10% and 13% according to Teagasc. The most expensive land in 2023 was in Waterford at just less than €50,000 an acre, while the national average for good quality land was €20,000 an acre.

Mayo recorded the lowest value for farmland in 2023 at €2,733 an acre for poor quality land on holdings of more than 100 acres.

Dairy farmers accounted for 69% of purchases, followed by tillage at 11%. A fifth of people surveyed classified themselves as ‘other’, which includes investors or hobby farmers.

Dairy farmer Daniel Sheehan from north Cork rents land but rising costs mean he may become the first member of his family in 170 years to be forced to give up farming.

He said: ‘The land, it’s going back to 1840 with the same family and debt comes into play. You don’t want to be the generation that didn’t continue it on.

‘What floored me is how quickly this changed. I would have seen myself as being somewhat viable although precarious because the land was rented, but in the space of a month, I was looking at my own viability.

‘It was frightening – you just don’t expect it to happen. I’m sure I’ll survive but it’s difficult because it’s my bread and butter and it’s my life. It’s my family’s life. It was what we were born, bred and raised to do. It’s what my father before me did.

‘Of course I can change and you do what you have to do to make a living. But it’s the kind of love of my life and it’s just, I suppose, I just have to swallow that.’