Advice for New Entrants
Most new entrants to dairy farming don’t show a profit until year three. However, with careful planning and the right business structure, there are potential savings to be made.
New entrants usually follow the same path when starting a dairy enterprise. The process begins with research, followed by a series of steps leading up to commencing milking.
Typically, these steps include:
Preliminary dairy research
Preparing building plans
Approaching bank for funding
Applying for planning
New entrants often don’t spend enough (or any!) time considering if their business is correctly structured. Most farmers automatically operate as sole traders or partners, although the number of limited companies in the dairy sector has increased in recent years.
Look at the projections and examine the following
Effect of Stock Relief
Is 100% Stock Relief available
Remember the tax saving limit on young farmers of a tax saving of €70k
Have you been farming before and can you use Income Averaging
How long will the benefit of averaging be worthwhile
What are the capital allowances and what are they each year for first 5 years
Armed with this information you can then implement a tax projection for the years and more importantly examine are you in the best structure.
If tax is becoming an issue from year 3 onwards have you considered the option of a company from day 1.
If you move into a company
Borrowings are in the company
Buildings are in the company
No Stamp Duty on transfer of buildings in as they are in as they are being built
So who should consider the company?
If the following indicators apply please consider it carefully:
Profit per cow will be above €750
No off-farm income and milking at least 70/80 cows
Capital spend of less than €3k per cow
Likely to expand
Willing to look at minimising tax
Your own or spouses off-farm income
Take time and examine the options early in the day to ensure you are in the right structure.