Tax treatment of agricultural land with solar panels

In an effort to encourage farm diversification and renewable energy, the Minister for Finance Paschal Donohoe has extended agricultural relief to farmland which has installed solar panels.

Agricultural relief is a tax relief from Capital Acquisitions Tax (CAT) on a gift or inheritance of agricultural land or property. It operates by charging the tax on a reduced market value (referred to as ‘agricultural value’) of the particular agricultural property. Market value is reduced by 90%.

To qualify for the relief, the following conditions must be satisfied:

• Property must be agricultural property
• The beneficiary must satisfy the ‘80% agricultural property’ test
• The beneficiary must satisfy the various ‘active farmer’ requirements

Property that qualifies as agricultural property includes agricultural land, crops and trees on land, farm buildings and dwelling houses, farm machinery, livestock and milk quotas. Agricultural relief has recently been updated so that the definition includes land on which solar panels are installed once less than 50% of the land is occupied. Where solar panels are installed, the land not occupied by solar panels must be actively farmed.

To qualify as a farmer, at least 80% of the gross market value of the property to which a person is beneficially entitled must comprise of agricultural property.

To qualify as an active farmer, the beneficiary must farm the land as an active farmer or be a qualified farmer and farm the land or lease the land to an active farmer or a qualified farmer. An active farmer is someone who farms the land for at least 50% of his or her working time.

For additional information, please contact a member of the tax team.