I’m going to look at the tax implications of an inheritance from Uncle Pat. A case like this crossed my desk a few weeks ago. It was interesting for the taxes involved, and also for the work the executors had to do. While there was inheritance tax, there were other taxes too, like VAT and even CGT. The assets were valuable, so you are very mindful of what, if any, reliefs apply. Otherwise, the government will be doing very well out of Uncle Pat. Let’s look at the
- Background
- Uncle Pat’s assets
- Billy’s assets
- Business Property Relief
- Niamh and Mary
- Summary
Background
Pat Dunne has been contracting for years around the farms of Carlow town. Cutting crops, silage, sowing and spraying. Always done at a fair price and with minimal fuss. He loved the farmers in the area, especially the ones who paid him on time and who threw in an extra €50 for luck. His passion in life was machinery. Seeing all the major brands and latest technology at the ploughing every year was a wonder to behold. He needed a few young lads from the locality in the Summer months. His busy season. They were always appreciative of getting paid on time and being well fed too from the farmers and local pubs.
Pat didn’t marry and didn’t have children. That didn’t mean he was lonely. He had one sister, Mary, who lived close by, and she was always very kind to him. Bringing him dinners in later years and giving the house a once-over when Pat would go for his afternoon nap. Mary could see he was slowing down. She was happy that Billy, who was working for Pat for a few years now, took on more responsibility. “Whatever we do, we can’t let down those farmers; they need us” was a common Pat saying.
Niamh, Mary’s daughter, is Pat’s niece. He has always been Uncle Pat to her. They were very close, and she has great memories of visiting Uncle Pat when she was younger. There was a buzz about the place in the summer months. The waft of diesel, the constant chatter of men at work, repairmen and farmers all mixing together. Getting the jobs done. Like her mother, Niamh looked after Pat in his later years. He passed away in September 2025, after 86 years on this earth.
Uncle Pat’s assets
Apart from his home and sheds, Uncle Pat’s assets were machinery and cash. His estate has the following assets and values
| House | €400,000 |
| Sheds | €200,000 |
| Massey Tractor | €40,000 |
| Rabe Harrow | €10,000 |
| Krone Sprayer | €8,000 |
| Westwood Trailer | €7,000 |
| Total | €665,000 |
It was a shock to Mary and Niamh that Billy inherited these assets. They inherited the rest of his assets between them. These were
| BOI Deposit Account | €210,000 |
| PTSB deposit account | €100,000 |
| Fieldmaster Trailer | €10,000 |
| New Holland Harvester | €80,000 |
| John Deere Tractor | €50,000 |
| Ride-on mowers | €10,000 |
| Total | €460,000 |
We helped Niamh’s husband last year with a business property relief claim that saved him a chunk of tax. She was hoping we could help her out with this. We had a call to get some background, and we discussed some reliefs in general. My initial view was that she and her mam wouldn’t be able to get any reliefs, but we would check it out further.
Billy’s Assets
The value of the assets that Billy got from Pat is €665,000. The value of the house and sheds is €600,000, and the machinery value is €65,000. Billy was no relation to Pat. As a result, he falls into the Group C threshold, whereby he doesn’t pay tax on the first €20,000. This is on the basis that he hasn’t already used his Group C threshold. With no reliefs, his CAT liability will be
| Value of inheritance | €665,000 |
| Less Group C threshold | (€20,000) |
| Taxable Value | €645,000 |
| Tax Payable 33% | €212,850 |
Can Billy get any reliefs? What about agricultural relief? Agricultural relief is a non-runner. The reason is that there’s no land coming with the house, sheds or machinery. Per the Revenue manual on this
“The relief will only apply to farm buildings and dwelling houses if they are of a character appropriate to the agricultural land being transferred. A transfer of farm buildings and dwelling houses on their own will not qualify for the relief”
Likewise, the farm machinery won’t qualify for agricultural relief. This is for the same reason because no land is transferring to Billy. The farm machinery must be situated on agricultural land to qualify. As agricultural relief isn’t a runner. The next relief to look at is business property relief
Business Property Relief [BPR]
The major advantage of agricultural relief over business property relief is the farmhouse. If you get Agri relief, it would reduce the value of the farmhouse down by 90%. Not so with BPR.
BPR is available on gifts or inheritances of “relevant business property”. Within that definition is a business such as the business of a sole trader like a shop, pub, etc. There is also a minimum ownership test where Pat must have owned the assets for 2 years before the inheritance.
My view is that once Pat was carrying on a business and Billy continues to carry on the business, then he should get BPR. If he does, his tax liability would look like this
| Value of sheds | €200,000 |
| Machinery value | €65,000 |
| Total | €265,000 |
| BPR 90% | (€238,500) |
| Taxable value | €26,500 |
| Dwelling house | €400,000 |
| Total | €426,500 |
| Tax Payable 33% | €140,745 |
Clawback
There is a clawback of BPR if the property inherited ceases to qualify as relevant business property. This runs for 6 years from the valuation date, which is usually the date of grant of probate. It could be an earlier date than the grant of probate if Billy had use of the assets before then. There are provisions to replace property that has been sold.
The issue for Billy is paying the tax. He didn’t inherit cash, so will have to fund the tax liability from his own resources. Billy can pay the tax in instalments over 5 years. There’s a reduced rate of interest of 6% per annum for such an arrangement.
Niamh and Mary
Niamh and Mary inherit €460,000 between them, which is cash of €310,000 and machinery of €150,000. So, €230,000 each. Like Billy, they won’t get agricultural relief as no land is passing to them with the machinery. They won’t get BPR either. They aren’t going to carry on the trade of Uncle Pat, nor will they carry on another trade. Mary is 85 now and has been retired a long time, and Niamh is a full-time employee. They intend to sell the machinery.
As they are sister and niece of Pat, they will get the Group B threshold of €40,000. Niamh confirmed the only inheritance she got before was from her dad. That falls into the Group A threshold, which doesn’t impact her Group B figure.
Her inheritance tax will be
| Value of cash and machinery | €230,000 |
| Less Group B threshold | (€40,000) |
| Taxable Value | €190,000 |
| Tax payable 33% | €62,700 |
She has the funds to pay this from the cash that Pat gave her. Mary will have the same tax liability. Next up is to sell the machinery.
Sell the machinery
Mary and Niamh plan to sell the machinery as soon as possible for at least €150,000, if not more. The first thing is they need to register for VAT. The sales proceeds for the machinery will exceed the registration limit of €85,000. Once registered, they will charge VAT at 23% on their sales. Niamh would love to hold onto the New Holland but has no room in the back garden in her housing estate for it! Uncle Pat loved that bloody machine.
They sell the harvester for €75,000 plus VAT and the John Deere for €50,000 plus VAT. There is a loss on the harvester of €5,000. They sell the other machinery for €20,000 plus VAT, which is the same value they inherited it for. They pay the VAT of €33,350 to Revenue and are very happy to have converted the machinery into cash.
Grant of Probate
The grant of probate for Pat’s estate was issued in March 2026. This would be the valuation date for Mary and Niamh. That date falls into the CAT year 1 September 2025 to the 31st of August 2026. As a result, they must file a CAT return and pay the tax by the 31st of October 2026. If they file the return and pay the tax on ROS, they can extend that deadline to the 18th of November 2026.
Summary
Thinking about this case, there are many men and women like Uncle Pat in rural Ireland. Farmers with houses, bits of land and machinery who have no children. Valuable assets with land and house prices increasing that lead to lots of tax for the government. Yet, the tax take from CAT isn’t huge in Ireland, but it must be increasing. If there’s no land passing, getting agricultural relief is difficult. If that fails, is there business property relief? That will depend on the facts of the case.
I love listening to music and the song lyrics. If they tell a story or are somewhat poetic, it grabs my attention. And then I wonder if that’s suitable for a blog. A song from Ash called Uncle Pat fits perfectly here. I’ll leave you with some of the lyrics written by Tim Wheeler
And here in a clearing
Overgrown with moss and ivy
Is your lovely grave
At dusk I will make my way
Along the lanes and through the fields
To where my cottage is
But before I step inside for bed
I’ll look up at the stars as we had
All those years ago
So here’s for Uncle Pat
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