The Financial Context of Farming – Financial barriers to female farm ownership in Ireland

Introduction

Farming is an important sector in Ireland, and it is the grassroots of the agricultural industry. However, there are stark differences in the ratio of farms owned by men and women in Ireland today. Currently, 87% of Irish farm holders are male whereas females represent only 13% of Irish farm holders (CSO 2020). Women generally do not own the land they work on, instead they are farming land which is owned by their husband, brother or father. This paper is a review of financial barriers including tax implications which directly or indirectly constrain female participation in farming and farm ownership. The paper will first begin by discussing the taxes that apply to land transfers, secondly the issue of pensions will be discussed, and finally EU payments are examined.

Taxation

In most situations, there are three taxes to be mindful of when transferring a farm: Capital Gains Tax (CGT), Capital Acquisitions Tax (CAT), and Stamp Duty. There are two sides to a transaction: the person giving and the person receiving. Each are subject to tax but there are certain reliefs available in the farming context (Information is correct at date of submission, for more information see Irish Revenue Website).

CGT is a tax on any profit made on disposal of an asset. CGT is payable by the person who makes the disposal. Disposing of an asset encompasses selling, gifting and exchanging. It is the chargeable gain that is taxed, not the whole amount received. The rate of CGT is 33% for most gains. There is a relief available on disposal of a business or farm: Retirement Relief. CGT Retirement Relief seeks to encourage farmers to transfer land to the next generation during their lifetime. Retirement Relief is aimed at farmers aged 55 or older, although, importantly, there is a ten-year ownership and usage requirement to qualify. It is a relief on CGT when disposing of any part of the business or farming assets. There are two types of Retirement Relief, depending on whether a child or someone outside the family is receiving the farm. The term ‘child’ is broad and includes a child, stepchild, adopted child, fostered child, child of a deceased child, niece or nephew.

An issue arises where couples put land into joint names not realising that it could cause unintended CGT tax implications at a later point when it comes to transferring land to the next generation (Meehan 2023). Complications relate to the satisfaction of the ten-year rule for ownership and usage when land is in joint names. In many cases, the male is the only name on the herd number and the farm payments are all in his name. Even when the spouse has been actively involved in the farm, unless she can prove this on paper, she is not entitled to claim the relief as she does not meet the usage test. This applies both to spouses who have not worked outside the home and spouses who worked off farm.

While the non-farming spouse can step into the shoes of the farming spouse for the purposes of satisfying the ten-year ownership test, the same does not apply for the period of usage test. The result in most cases is that the farm is left in a will as no CGT arises for property transferred under a will rather than transferring the land during the parent’s lifetime. Alternatively, the wife passes back her joint interest in the land to the husband, who then transfers the full interest to the child. The husband satisfies the ten-year ownership requirement and as he has continuously farmed the land for ten years, he satisfies the ten-year usage requirement and thus qualifies for CGT Retirement Relief. Spouses are often unhappy at having to adopt these cumbersome mechanics to avail of the relief; it should be unnecessary. The legislation provides that the non-farming spouse can only step into the shoes of the farming spouse in terms of usage of the land in cases where the farming spouse is deceased. A suggestion is that the legislation could be amended to provide that only one of the spouses should have to meet the conditions to avail of the relief in joint ownership situations (Law Society of Ireland 2017; The National Dialogue on Women in Agriculture Report 2024). This would encourage more joint ownership of land between couples. 

CAT is a tax on gifts and inheritances and is paid by the person receiving or acquiring the gift. One can receive gifts and inheritances up to a set value over one’s lifetime before having to pay CAT. CAT is charged at a rate of 33%. One does not have to pay tax on a gift or inheritance if its taxable value is below a particular threshold. The threshold depends on the relationship to the disponer. You must pay tax on any remaining value above that threshold. There are three groups and the rate for each group is as follows:

There is a specific relief available where one receives a gift or an inheritance of agricultural property: Agricultural Relief. This relief reduces the taxable value of the property, including land, by 90%. To qualify for agricultural relief as a farmer, the value of one’s agricultural property must consist of at least 80% of ones total property value on the valuation date (this is called the ‘Farmer Test’). One must also farm the agricultural property on a commercial basis for at least six years from that date or lease the property to someone who farms the agricultural property on a commercial basis for at least six years from that date. This is known as the ‘Active Farmer Test’. Additionally, the person receiving the gift or inheritance, or the person leasing the property must either: have an agricultural qualification (green cert) or farm the agricultural property for at least 50% of their normal working hours as per Revenue guidelines. If the agricultural property comprised in the gift or inheritance does not qualify for Agricultural Relief, it may qualify for Business Relief which, like agricultural relief, reduces the taxable value of the business property which CAT is calculated on by 90%. Business Relief is becoming more important given the increasing number of farmers incorporating their farming trade.

However, if land is being transferred to a farmer and his/her spouse, both must meet the financial test to avail of the relief. The legislation could be amended to provide that only one of the spouses should have to meet the conditions to avail of the relief in joint ownership situations which would encourage more joint ownership of land.

To ensure agricultural relief is not clawed back, land cannot be transferred into joint names with a spouse initially as it could raise the issue of gift splitting. For example, if a farmer is gifted land from their parents but puts that land into the joint names of themselves and their spouse within three years of the initial gift of land from the parents, the Revenue may see it as gift splitting and thus a tax avoidance transaction. Consequently, the farm is usually transferred into the sole name of the child only. Years later, given the additional cost, time and effort involved, many choose not to transfer the land into joint names.

Another consideration is Stamp Duty. Stamp duty is charged when you transfer property, which includes purchasing land. Stamp duty on non-residential property currently applies at 7.5%. However, there are two reliefs available: Consanguinity relief and Young Trained Farmer Relief.

Consanguinity relief only applies to land transfers. To claim this relief, one must be related to the transferor and farm the land for at least six years or lease it for a minimum of six years to someone who will farm it. Whoever is farming the land must hold a specified qualification (green cert) or obtain one within a period of four years from the date the land was received, or spend at least 50% of their time farming. Consanguinity relief provides for a reduced stamp duty rate of 1% on family farm transfers.

To claim Young Trained Farmer Relief, one must: be under 35 years of age, hold a relevant agricultural qualification, have submitted a business plan to Teagasc, and be head of the farm holding. One must also intend to spend at least 50% of their normal working time farming the land and retain ownership of that land for a period of at least five years from the date of transfer. Young Trained Farmer relief eliminates Stamp Duty.

Since 1990, Stamp Duty is not payable on a transfer of property between spouses or civil partners. Previously, as noted by O’Hara (1998, p.115), “the existence of a tax on the transfer of gifts between spouses until 1990 actually reinforced the tradition of sole ownership and discouraged transfer of the farm to joint ownership.” It is difficult to pinpoint when a partner should be added to the title and it is most likely to be determined by the couple themselves. However, when they do decide to do so, there should be no financial barriers. Currently, there is the financial cost of a solicitor, land registry fees, and the possibility of CAT and gift splitting issues.

In summary, the rules for claiming Retirement Relief and Agricultural Relief both favour land being in the sole name of the farmer and thus penalise farmers who put land into joint names with their spouses (Meehan 2023). The Agri Taxation Review Report (2014) recommended that the provisions for claiming CGT Retirement Relief should be amended to allow for a spouse to step into the shoes of the farming spouse in terms of satisfying the 10-year ownership and usage requirement, and also that the provisions for claiming CAT Agricultural Relief should be amended to allow for situations where land is being transferred into the joint ownership of a spouse as an exception for claiming the relief.

There is already an approach for joint ownership with Young Trained Farmer Stamp Duty relief as a spouse does not have to satisfy the conditions of the relief – and the land can be put into joint names even if the spouse is over 35 years of age. A similar provision applies in a transfer of a site from a parent to a child. Section 30 of the Finance Act 2018 amended section 603A of the Taxes Consolidation Act 1997 to extend the relief to disposals to a child and their spouse or civil partner. This amendment applies to disposals made after the 1 January 2019 and provides that a site can now be transferred to a child and their spouse. Therefore, this could be expanded to an entire farm scenario.

The issue of pensions is another area that is affecting people’s decision regarding the official ownership of their family farm.

Pensions

Pension policy is an example of the unfairness that exists for a farm wife (Duvvury et al. 2012). A person assisting their spouse but who is not a partner in the business, is excluded from the contributory Irish state pension and therefore does not have a contributory pension or other social insurance benefits in their own right. Where the husband has PRSI cover, and the wife is helping on the farm, she is treated for PRSI pension purposes as a qualifying adult and qualifies for an increase on her husband’s pension. For a woman working on the farm and/or rearing children it is important that she pay PRSI otherwise she will not be entitled to her own pension and instead be treated as a qualifying adult on her husband’s pension. However, if the land is in joint names, it causes further problems and can actively prevent joint names on farms (O Sullivan 2020). Hayden et al. (2021) highlighted pension issues in general for farmers, thus an improved pension policy is required for farmers and spouses.

EU payments

Irish farmers receive subsidies from both the Irish government and the EU through the Common Agriculture Policy (CAP). However, there is a serious issue in terms of the proportion of the overall budget that females are in receipt of. According to the IFA (2019, p.9) “only 10% of the land in female ownership is eligible land for basic payments or 8% of payments.” There are different reasons for this, for example Shortall and Marangudakis (2022, p.752) note “women’s farms are smaller, generate less income and are often not eligible for CAP payments.” The Agri Taxation Review Report (2014, p.25) also highlighted the issue noting that “women tend to inherit smaller, less productive farms as evidenced by the fact that in 2012 women received less than 8% SPS payments.”

Each farm scheme has a different purpose behind it – for example to bring about change or a desired behaviour. The schemes act as a financial incentive. For example, Organic Farming Schemes are there to encourage and subsidise farmers to go organic. TAMS (Targeted Agricultural Modernisation Scheme) was set up with the purpose to financially help farmers to modernise farm infrastructure and machinery which would in turn be a benefit for the environment and farm safety. The Young Farmer top-up scheme was developed to incentivise young people into farming, to encourage farm transfers and to combat the issue of ageing farmers. So why can there not be a scheme that encourages female inheritance and participation? The Women in Agriculture Stakeholders Group (2021) called for incentives for female farmers in their CAP Submission. This helped bring changes in the TAMS scheme specifically for females – the Women Farmer Capital Investment Scheme – for building and improving farm buildings and equipment. The National Women’s Council (2021) Submission on the Draft Agri-Food Strategy to 2030 identified financial incentives through CAP as a key way to bring about change. Gender mainstreaming is advocated as a means to tackle gender inequality as seen in Australia. Shortall (2023) highlighted the different tools for gender mainstreaming including comprehensive training and gender budgeting in an effort to reorientate fiscal policy. According to Shortall and Marangudakis (2022) the Common Agriculture Policy (CAP) is key, but the European Commission rather than promoting gender equality has actually been inhibiting it by not adopting gender mainstreaming. Individual member states are now responsible for CAP and so there is no incentive or requirement to focus on gender from an EU level; instead, it is up to each national government. Therefore, Ireland itself can do more on gender mainstreaming. Shortall (2015) noted, however, that it is difficult to see how the gender mainstreaming of the CAP could change the existing gender inequalities in land ownership.

Conclusion

While no taxes or costs are gender specific, they do hinder women indirectly as landowners are usually male, and thus adding the wife to the title is an additional cost and thus an obstacle. A key finding is that tax is a significant issue. When one is gifted or inherits property from parents, as is the usual case with a family farm, they only transfer it to their child (not to the child and the child’s spouse) based on tax considerations. The individual must then wait a number of years before they can transfer it into joint names to avoid further tax issues. Many people then do not get around to it or see no reason to do so. The financial cost is a barrier when adding spouses to the title. The cost usually involves a solicitor fee and related expenses, for example, land registry fees. The Succession Planning Advice Grant is a welcome measure intended to tackle the intergenerational land transfer issue. The grant supports farmers aged 60 years and above to seek succession planning advice by contributing up to 50% of vouched legal, accounting and advisory costs, up to a maximum of €1,500. However, the disparity in the gender asset gap must address increasing female farm ownership specifically.

In February 2023, the first National Dialogue on Women in Agriculture took place, and the resulting report called for a revaluation of attitudes and a need to review farm tax reliefs to allow more female farmers, delivering 26 recommendations including those highlighted here. This follows on from recommendations made a decade earlier by the Agri Taxation Review Report (2014) to remove unintended technical tax barriers to female participation in agriculture.

However, one would also have to consider the repercussions of putting a farm into joint names such as on pensions, which has been a problematic issue for many women on farms and is an area that needs policy intervention especially in joint ownership situations. There are also other considerations, for example, many farms now have significant debt and this raises the question as to whether women are willing to have their names added to that too, to take the benefit of the asset but also the consequence of the debt? However, whether the woman’s name is on the debt or not, it is likely that she will be impacted by it, and she may in any event have signed as a guarantor. Another issue that can arise is if there is a sudden tragic accident resulting in death or incapacitation. The partner may have difficulty accessing the farm bank account or buying and selling cattle and, as such, the farm is put into a financial lockdown, which is another pitfall that could result if both names are not included on the farm business paperwork.

Placing all, or part, of the family farm in joint names can be done for a number of reasons such as a gesture toward spousal equality or for tax-related reasons (O’Sullivan 2020). However, as noted by Shortall (1997, p.116) “changing legal status may simply represent a means of tax avoidance rather than a deep-rooted change in their position on the farm.” Therefore, although financial and tax reforms might help, it is still the deep-rooted patriarchal practices that must be overcome if we are to truly tackle the gender asset gap in Irish farm ownership.

References

Agri Taxation Review Report (2014) Report of the Agri-Taxation Working Group to the Minister for Finance and the Minister for Agriculture, food and the marine, available: https://igees.gov.ie/wp-content/uploads/2014/10/Agritaxation_-Review-_Final_web-pub.pdf

CSO (2020) Central Statistics Office, available: https://www.cso.ie/en/releasesandpublications/ep/p-coa/censusofagriculture2020-preliminaryresults/demographicprofileoffarmholders/

Duvvury, N., Ní Léime, Á., Callan, A., Price, L. and Simpson, M (2012) Older Women Workers’ access to Pensions: Vulnerabilities, Perspectives and Strategies, Irish Centre for Social Gerontology, National University of Ireland Galway.

Hayden, M.T., McNally, B. and Kinsella, A. (2021) ‘Exploring state pension provision policy for the farming community’, Journal of Rural Studies, 86, 262-269.

IFA (2019) Irish Farmers Association Diversity Strategy Towards 2025, available: https://www.ifa.ie/wp-content/uploads/2021/02/IFA-Diversity-Report-A4-Sep19-FINALWeb.pdf

Law Society of Ireland (2017) Pre-Budget Submission on Issues of Probate and Taxation, April 2017, available: https://www.lawsociety.ie/globalassets/documents/committees/taxation/submissions/pre-budget-submission-2017.pdf

Meehan, A. (2023) Views sought for dialogue on women in agriculture, ‘Law Society Gazette Ireland’, available: https://www.lawsociety.ie/gazette/top-stories/2023/january/views-sought-for-dialogue-on-women-in-agriculture

National Women’s Council (2021) Submission on the Draft Agri-Food Strategy to 2030, available: https://www.nwci.ie/images/uploads/NWC_Submission_to_the_Agrifood_Strategy_2030.pdf

O’Sullivan, M. (2020) ‘The financial pros and cons of joint land ownership for farming couples’, Farming Independent, 10 Aug, available: https://www.independent.ie/business/farming/the-financial-pros-and-cons-of-joint-land-ownership-for-farming-couples-39425537.html

O’Hara, P. (1998) Partners in Production?: Women, Farm, and Family in Ireland. Berghahn Books.

Shortall, S. (1997) ‘I: Women, Farming and Access to Land’, Irish journal of sociology, 7(1), 111–118.

Shortall, S. (2015) ‘Gender mainstreaming and the Common Agricultural Policy’, Gender, place and culture, 22(5), 717–730.

Shortall, S. (2023) ‘Is agriculture a sector or an occupation?’ [SlideShare] presented at Geary Seminar Series, University College Dublin, 14 February, available: https://www.ucd.ie/geary/t4media/Is_agriculture_a_sector.pptx

Shortall, S. and Marangudakis, V. (2022) ‘Is agriculture an occupation or a sector? Gender inequalities in a European context’, Sociologia Ruralis, 62, 746-762.

The National Dialogue on Women in Agriculture Report (2024) Department of Agriculture Food and the Marine, available: https://assets.gov.ie/282362/66655b42-18ab-4552-8c36-7941b8b8f686.pdf

Women in Agriculture Stakeholders Group (2021) Draft interventions for CAP strategic plan, available: https://assets.gov.ie/202062/c8f7ec3b-a502-480d-9ade-cdff078a3250.pdf

[i] *With thanks to Dr Caroline Murphy, Kemmy Business School, University of Limerick for her input and guidance with this research. This article forms part of a larger body of work examining the combined effect of legal, financial, social and cultural barriers to female farm ownership in Ireland – Mary Curtin’s PhD thesis: Gaining Ground? An Examination of Female Ownership and Participation in Farming in Ireland (University of Limerick 2023).

This paper is available to download here.