30 Jan, 2019

Changing Farm Structures

Changing your farm structure is a big decision for any farmer. All Department of Agriculture, Revenue and legal aspects should be reviewed well in advance.

Changing your farm structure is a big decision for any farmer and all Department of Agriculture, Revenue and legal aspects should be reviewed well in advance.

Registered Farm Partnerships – Deadline February 2019

Once your accountant and solicitor have examined the proposed structure and confirmed that it makes financial, succession and legal sense, the next step is to deal with the Department of Agriculture. Templates and sample documents to assist farmers are available on the DAFM website.

From a legal and taxation point of view, registered or unregistered partnerships are virtually the same, the main difference is that Department of Agriculture benefits are available to registered partnerships.

Registered Partnership benefits:

  • Extra grants available to all partners—double TAMSII

  • Allows more than one herd number in the entity

  • Sorts all issues with herd numbers and BPS - owner of BPS does NOT transfer entitlements to other partners (unless they wish to)

  • Useful as a succession planning tool to bring Young Farmers into business

  • Tax benefits – New stock relief 50%

Beware the Joint Herd Number Issue – Am I in a Partnership?

Over the past number of years, some farmers have created “Joint Herd Number” structures in order to qualify for the National Reserve and Young Farmers Scheme without seeking either legal or taxation guidance. The question arises in individual cases as to whether a partnership has been created. Potential problems include:

  • Whether the structure grants immediate, unintended legal ownership rights to the underlying farming assets of the enterprise, to the new joint owner.

  • Whether the structure renders the terms of existing Wills which do not reflect the existence of the partnership open to legal challenge as a consequence of not referring specifically to the partnership.

  • Whether the structure creates unplanned and unintended Income Tax, Capital Gains Tax, Capital Acquisitions Tax, or Stamp Duty bills.

Ifac 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 GLAS. You must wait until approval has been granted before moving herd number.

  • BPS must always be transferred to the new entity before 15 May—next date 15 May 2019.

  • Be aware of tax/legal issues of moving a herd number to joint names without setting up either a registered or unregistered partnership.

A properly planned partnership structure such as a Registered or Unregistered Farm Partnership can assist in farm transfers and succession, enhance profitability, improve work-life balance, reduce Income Tax, secure 50% Stock Relief and a potential double ceiling for the new TAMS II Capital Grant. However, before deciding to enter into a partnership, always seek professional advice.