The new Young Farmers Top Scheme is getting a significant uplift with estimations of €180 per ha on the first 50ha. The rollout of a TAMS III and increasing the threshold to €90,000 per person/entity is also significant. Many farmers look to maximise these schemes through registered farm partnerships, joint herd numbers (with young farmers) and LTDs. What’s very important to notice these are business structure changes and have legal consequences.
However, changing farm structures is a big decision for any farmer, and all Department of Agriculture, Revenue and legal aspects should be reviewed before entering any structure. The number one reason for changing business structure is because it makes sound business, tax and succession sense with the ability to claim either young farmer grants or enhanced payments as a bonus, not the sole reason.
Once your accountant and/or solicitor have examined the structure and it makes financial, succession & legal sense, the next step is to deal with the Department of Agriculture. The current deadline for applying for a Registered Farm Partnership number this year is the 10th of February 2023, and for a joint herd number and LTD is the 15th of May. While you can 100% be in a registered farm partnership after this date, your BPS will remain in your name for the 2023 scheme year.
What is your business structure - As per Survey
64% of farming as a sole trader
19% Partnership
15% Ltd
2% share farming
The Benefits
A registered farm partnership comes with lots of advantages. Here are the main ones:
Department of Agriculture:
As a registered partnership, you can avail of various grants, including a double ceiling for TAMS/investment on the farm.
Tax:
Enhanced stock relief: 50% stock relief as opposed to the standard 25%.
100% stock relief for young-trained farmers is still available for those who are partners
Will achieve the active farmer status for succession
Practical Benefits:
Registering your partnership also provides a good route for succession and expansion.
Non-family partnerships are an effective amalgamation of skills and resources and offer helpful economies of scale.
The Joint Herd Number Issue – An Unintentional Partnership?
Over the past few years, farmers have created “Joint Herd Number” structures in order to qualify for the National Reserve Young Farmers Scheme without seeking either legal or taxation guidance. The question arises in individual cases as to whether a partnership has been created, and if so, what are the potential consequences?
There are several criteria needed to demonstrate the validity of Young Farmer within a joint herd number (to access certain Young Farmers grants):
A bank statement or letter from the bank confirming that the bank account is in joint names.
A declaration, witnessed by a solicitor that the Young Farmer could and would exercise effective and long-term control, either solely or jointly over the farming entity for which the application was being submitted.
A declaration that the Young Farmers’ control extends to decisions surrounding the management, benefits and financial results associated with the farming entity.
The characteristics identified above can be used to determine whether a partnership exists or not. If deemed to be a partnership, unwittingly and unknowingly, it may have the following outcomes:
Grant immediate unintended legal ownership rights in the underlying farming assets of the enterprise to the new joint owner.
Render the terms of existing wills, not reflecting the existence of the partnership, open to legal challenge as a consequence of not referring specifically to the partnership.
Create unplanned and unintended Income Tax, Capital Gains Tax, Capital Acquisitions Tax, or Stamp Duty bills.
ifac‘s Do’s & Don’ts
Do NOT transfer your herd number or BPS to a registered partnership before deciding with your accountant/solicitor who exactly is in the partnership.
Do NOT transfer your herd number to a registered partnership or joint names if you have applied and not been granted approval for a TAMS grant or ACRES. You must wait until approval has been granted before moving herd number.
BPS must always be transferred to the new entity before the 15th May – next date 15th May 2023
Be aware of tax / legal issues of moving a herd number to joint names without setting up either a registered or unregistered partnership.
Make sure you are 100% aware of all the conditions of each and very scheme you apply for.
A properly planned partnership such as a Registered or Unregistered Farm can assist in the farm transfer and succession process, enhance profitability and work-life balance, reduce Income Tax, secure 50% Stock Relief and a potential double ceiling for the new TAMS II Capital Grant.