Farm partnerships registered with the Department of Agriculture, Food & The Marine may now apply to transfer to the Succession Partnership Register, subject to meeting certain criteria. This new register provides an annual income tax credit of €5,000 for up to five years, allocated according to the profit sharing ratio between a qualifying farmer and his/her successor.
Frequently Asked Questions
Do I need to be on the DAFM register of farm partnerships to form a Succession Farm Partnership? Yes.
What are the benefits of being on the Register of Succession Farm Partnerships? In addition to registered farm partnership benefits such as preferential stock relief and the collaborative farming grant, a Succession Farm Partnership agreement provides a tax incentive of €5,000 for up to five years and the efficiencies of having a succession plan. The scheme aims to prepare successors to take over when the time is right.
If I form a Succession Farm Partnership, do I still need to have a Will? Yes. It is very important to have a valid will that reflects your succession agreement. Otherwise, if one of the partners were to die, the partnership would be dissolved and the normal rules of the Succession Act would apply to the transfer of the estate.
What happens when the Succession Partnership Agreement ends? If the partnership is still active, it will revert to the DAFM register of farm partnerships and operate under those rules.
5.** When do I have to transfer my assets to my successor and what proportion must I give?** You must transfer at least 80 percent of all assets within 3 to 10 years of registering the succession partnership.
Can I name more than one successor under the scheme? Yes, however, the proportion of assets to be transferred to each successor must be outlined in the succession partnership agreement.
Can any of the parties to a Succession Farm Partnership be incorporated? No. The agreement must be between the farmer and successor and both must be natural persons.
Are there financial supports available for setting up a Succession Farm Partnership? Partnerships on the register of farm partnerships may apply for the collaborative farming grant under the rural development programme.
9.** Is there a limit to the number of people who can be in a Registered Succession Farm Partnership?** A succession farm partnership may not consist of more than ten partners. The categories are the same as those that apply to registered farm partnerships.
Where can I find more information on the Succession Farm Partnership Scheme? Additional information is available on the DAFM and Teagasc websites or through your farm advisor.
Case Study
John, aged 66 has two sons aged 36 and 39 who have both recently come home to farm full time. The farming operation is as follows:
Dairying and beef
270 acres
Unregistered partnership. Large investments made in recent years so capital allowances are quite good.
Tax not a problem and projected over the next five years total to be at the low rate band for each
Requirement To obtain the new Succession Tax Credit of €5,000 p.a.
Procedures — Step 1
Register with the Department of Agriculture as a Registered Partnership.
Liaise with agri-advisors in relation to partnership issues, e.g. herd numbers.
Liaise with banks in relation to loans, overdraft
Brief solicitor on Registered Succession Partnership and liaise with solicitor on licensing of land to the partnership, changes to Will, etc.
Step 2 — Problem
The eldest son can get his share of the Registered Tax Credit for 2017 however, tax legislation states, ‘No partner in a Succession Partnership shall be entitled to the credit in a year where a successor has attained the age of 40 at the commencement of that year.’ Therefore the credit stops in full for 2018 for all partners.
Solution
Transfer of part to the older son today. While he will not be entitled to the tax credit, this will open up the Registered Succession Partnership for the father and other brother.
The eldest son will be eligible for 1% stamp duty on the transfer — this saves €13,500 in Stamp Duty.
Amend the Partnership Agreement with the Department of Agriculture
Register the Succession Partnership between the younger son and the father
Registered Succession Credit will be available for four years, i.e. ’17, ’18, ’19. And ’20, ’21 of benefits of €25,000.
Summary
As the eldest son is 40 this year, he is not eligible for the Registered Succession Partnership Credit. However, by transferring part of the farm to the eldest son today, the father and younger son will qualify for the credit. As the father is aged under 67, the Stamp Duty on the transfer to the elder son qualifies for the 1% Stamp Duty rate, a saving of €13,500.