Leasing farmland: securing tax relief while protecting long-term value

This may be particularly relevant where farming families also depend on off-farm income. However, the decision should not be driven by rent alone. Although the tax treatment of lease income can be attractive, the wider implications for succession planning, future transfers and long-term control of the property should also be considered. A long-term lease can provide a practical middle ground, but it is best assessed as part of the family’s wider plans for the farm, including any future transfer to the next generation.

How the relief works 

Ireland provides income tax relief for certain income arising from the long-term leasing of farmland, which can make leasing an attractive option where the conditions are met. The level of relief depends on the term of the lease, with more favourable annual limits available for longer arrangements. However, the relief is subject to specific statutory requirements, cannot create or increase a tax loss and should not be assumed to apply automatically.

Key conditions 

While the relief can be valuable, it is not available in every case. A number of conditions must be met, including that the land is in Ireland, the lease is in writing for a definite term of at least five years and the tenant uses the land for a farming trade on a commercial basis. The landowner must generally be an individual, the arrangement must be on arm’s length terms and relief will not be available where the tenant is connected with the landowner. In addition, where farmland was purchased under a contract entered into on or after 1 January 2024, a seven-year holding requirement may need to be satisfied before relief can be claimed. For that reason, the proposed lease should be reviewed carefully in advance rather than assuming the relief will apply automatically.

How the relief is calculated

Where a qualifying lessor has rental profits chargeable under the normal rules for rental income, including profits from a qualifying farm lease, relief is given as a deduction in computing total taxable income.

The relief is broadly limited to the lower of the profit from the qualifying farm lease (or leases) and the relevant annual limit for the lease term.

For qualifying leases entered into on or after 1 January 2015, the annual limits are currently:

• €18,000 for a lease of 5 years or more but less than 7 years
• €22,500 for a lease of 7 years or more but less than 10 years
• €30,000 for a lease of 10 years or more but less than 15 years
• €40,000 for a lease of 15 years or more

Where rent is receivable for only part of a year, the relevant annual limit is reduced proportionately. Only one reduction is available, regardless of the number of qualifying leases, and the relief cannot create or increase a rental loss.

Example

Shane enters into a qualifying lease of farmland with Liam on 1 January 2023 for a term of 10 years. After the normal rental deductions, Shane’s profit from the qualifying lease for 2023 is €25,000. He also has €37,000 of profits from other Irish rental properties, giving total taxable rental profits of €62,000.

As the annual limit for a 10-year lease is €30,000, Shane’s relief is restricted to €25,000, being the lower of that annual limit and the profit from the qualifying lease. His taxable rental income is therefore reduced from €62,000 to €37,000. 

Connected party leases

Particular care is needed where land is leased to a connected party, as Revenue’s guidance makes clear that relief is not available where the tenant is connected with the landowner. Different treatment may apply where land was acquired by gift or inheritance, so the basis on which the land was acquired should be reviewed carefully before lease terms are agreed.

Why succession planning still matters 

Leasing is not just an income decision. If farmland is later transferred, the lease can affect the tax position for both the current owner and the successor, including access to capital gains tax Retirement Relief, capital acquisitions tax Agricultural Relief and, potentially, stamp duty reliefs or clawbacks. It is therefore usually best considered as part of the farm’s wider succession plan.

Practical considerations  

A qualifying lease must be in writing, for a definite term of at least five years and on arm’s length terms. Taking advice before the lease is agreed can help ensure it supports both immediate income needs and longer-term plans for the property. 

Conclusion 

Leasing farmland can be an effective structure where the relevant conditions are satisfied, and the wider implications are understood from the outset. For many modern farming families, particularly where off-farm income also forms part of the household picture, leasing may offer a practical balance between retaining the asset, generating income and preserving future options for the next generation. With proper planning, it can support both current needs and longer-term family objectives.

If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Forvis Mazars team below: