The average amount of wool a sheep produces annually has helped scupper a farmer’s bid for ‘favourite nephew relief’ in the inheritance of his late uncle’s €1.35 million farm.
The nephew inherited 240ac of land from his late uncle, which was made up of 170ac of agricultural land and 70ac of forestry.
The deceased was resident in a nursing home for five years before his death in 2009 and the nephew claimed to Revenue that he operated the man’s sheep farm and there were 100 ewes on the land when the uncle fell ill.
The farmer’s agent claimed that there was no Capital Acquisitions Tax (CAT) due, as his client was entitled to “agricultural relief” and “favourite nephew relief”.
‘Favourite nephew relief’
Agricultural relief has the effect of discounting down the value of agricultural assets by 90% of their market value for CAT, and Revenue agreed that the man qualified for agricultural relief.
The farmer also claimed ‘favourite nephew relief’ which is a separate relief where recipients can qualify for reliefs only availed of by children of someone who has died if certain criteria are achieved.
However, Revenue disagreed with the farmer that he qualified for ‘favourite nephew relief’ and issued a CAT bill for €21,788 for 2018. The farmer appealed the assessment to the Tax Appeals Commission (TAC).
In response to Revenue querying the ‘favourite nephew relief’, the agent told Revenue that “what I can do is protect my client from Revenue putting the largest shovel into their resources”.
In order to qualify for ‘favourite nephew relief’, the farmer had to show that he was present on the inherited lands, that his labour was used in maintaining those lands, that material benefit was conferred on the deceased’s lands or that dominant decision-making regarding the management of the lands was exercised by the farmer.
Tax Appeals Commission
In its determination, TAC commissioner, Andrew Feighery found that the €21,788 CAT assessment stands. He found that the nephew did not spend the requisite time looking after the sheep on the inherited lands.
The commissioner noted the nephew’s agent’s failure to engage with the Department of Agriculture, Food and the Marine (DAFM) to obtain any of the evidence suggested by Revenue.
Feighery also stated he had established that the average amount of wool produced by a sheep is on average 2lbs to 30lbs/year and not the 2.5lbs/sheep alleged by the nephew’s agent in evidence.
The agent stated his figures concerning the sheep’s wool was evidence of the 100 sheep being present on the inherited lands in 2004.
In a letter in April of this year, the nephew’s agent submitted by virtue of the deceased bequeathing the farm to the nephew that this was sufficient evidence to prove that the nephew satisfied the “favourite nephew” test.
In the correspondence, the agent said his client’s mother “beggared herself by paying nursing home costs for her beloved brother [the deceased] for many years and when the money ran out, a field of the lands was sold”.
“Of course it would be her son who would inherit the land. The deceased was seriously indebted to his sister. There is no clearer definition of favoured nephew,” the agent added.
The agent stated that “for five years and upwards [the deceased] was in a nursing home and I can confirm that for five years and upwards, (his client) worked on a full-time basis and 15 hours per week and upwards as a son would for his father”.
“There were sheep to be looked after and the property to be protected from those who might seek to obtain adverse possession,” the agent added.