“I am a young dairy farmer and the owner of lands adjoining me has approached me about forming a partnership. None of his children are farming, however, he wishes to leave the farm to them in his will. He has been advised by his accountant that he needs to continue farming, otherwise his children will pay tax when the farm is transferred over to them in his will. He has suggested forming a partnership rather than entering a lease. What is involved in forming a partnership?”
It appears that his children might not be able to avail of agricultural relief in order to reduce the capital acquisitions tax potentially payable by them when the farm is eventually transferred over. The other option open to the children would be to avail of business relief. If the land was leased out, business relief may be disallowed as their father’s activities in leasing out land could constitute a business wholly, or mainly of making or holding of investments, which is excluded from being relevant business property. Consequently, by farming through a partnership the land can continue to be regarded as a relevant business property for the purposes of claiming business relief.
There are many benefits of having a registered farm partnership, including financial benefits offered by the Department of Agriculture to help encourage and maintain the development of partnerships. These benefits include the Support for Collaborative Farming Grant Scheme and preferential stock relief for registered farm partnerships. It is also envisaged that registered farm partnerships can avail of preferential treatment in the implementation of TAMS, GLAS, ANC and BPS, whereby each partner will qualify in their own right for the maximum grant not withstanding that the partners are farming through one entity being a registered farm partnership.
Currently, the only partnerships which qualify as registered farm partnerships are those relating to milk production partnerships (MPPs). However, the Department has recently published new rules that will apply to all registered farm partnerships to include non-milk partnerships.
These new rules will be given legal effect once the statutory instrument is signed by the Minister in the coming weeks. It is anticipated that these new rules will come into effect from 1 April 2015, to coincide with the abolition of milk quotas.
In order to form a registered partnership under the new rules, there must be at least two people, one person from category (i) below and one or more persons from categories (i) or (ii):
(i) A farmer who has been farming in his/her own right for two years preceding the date on which the partnership is established.(ii) A person with an appropriate agriculture qualification whose contribution to the farm partnership entitles him/her to at least 20% of the profit sharing arrangement and, if over 41 on date of registration, has an annual off farm income of less than €40,000. It appears that the adjoining landowner may qualify under category (i), while you may qualify under category (i) or (ii) – depending on when you commenced your farming activities. Other persons not described in categories (i) and (ii) above, for example family members or a person with or without land, who wish to make an investment may also be registered as participants in the partnership, but will not have access in their own right to EU and State support scheme benefits that may accrue to the registered farm partnership. Interestingly, the new rules provide that a person may not be involved, either as a category (i) or (ii) partner in more than one registered farm partnership at any one time, which begs the question whether they can be a partner under the other person category in other farm partnerships.
The practical effect of this would be that the person would have to submit all their agricultural holdings and farming assets to one registered farm partnership and could only qualify once for Department scheme payments, but could potentially bring their expertise to other registered farm partnerships and share in the profits. Similar to the rules for registered MPPs, the partnership agreement must cover a minimum term of five years, although an exemption can be sought. The partners are obliged to submit all their agricultural holdings and farm assets into the farm partnership subject to limited exceptions, such as lands leased out to another user. The Department will assign a unique farm partnership reference number to each registered farm partnership, which will be used for applications to Department schemes. However, the DVO will continue to assign one or more herd numbers to the participants in the partnership.
The new rules provide that a registered farm partnership cannot be formed between independent holdings whose hubs are in excess of 50km apart, which has been significantly reduced from the 100km distance limit under the old rules. However, a derogation from the distance limit may be sought in exceptional circumstances. The new rules also provide that each registered farm partnership will be required to submit a copy of their Form 1 Partnership Tax Return on an annual basis.
“I am a young dairy farmer and the owner of lands adjoining me has approached me about forming a partnership. None of his children are farming, however, he wishes to leave the farm to them in his will. He has been advised by his accountant that he needs to continue farming, otherwise his children will pay tax when the farm is transferred over to them in his will. He has suggested forming a partnership rather than entering a lease. What is involved in forming a partnership?”
It appears that his children might not be able to avail of agricultural relief in order to reduce the capital acquisitions tax potentially payable by them when the farm is eventually transferred over. The other option open to the children would be to avail of business relief. If the land was leased out, business relief may be disallowed as their father’s activities in leasing out land could constitute a business wholly, or mainly of making or holding of investments, which is excluded from being relevant business property. Consequently, by farming through a partnership the land can continue to be regarded as a relevant business property for the purposes of claiming business relief.
There are many benefits of having a registered farm partnership, including financial benefits offered by the Department of Agriculture to help encourage and maintain the development of partnerships. These benefits include the Support for Collaborative Farming Grant Scheme and preferential stock relief for registered farm partnerships. It is also envisaged that registered farm partnerships can avail of preferential treatment in the implementation of TAMS, GLAS, ANC and BPS, whereby each partner will qualify in their own right for the maximum grant not withstanding that the partners are farming through one entity being a registered farm partnership.
Currently, the only partnerships which qualify as registered farm partnerships are those relating to milk production partnerships (MPPs). However, the Department has recently published new rules that will apply to all registered farm partnerships to include non-milk partnerships.
These new rules will be given legal effect once the statutory instrument is signed by the Minister in the coming weeks. It is anticipated that these new rules will come into effect from 1 April 2015, to coincide with the abolition of milk quotas.
In order to form a registered partnership under the new rules, there must be at least two people, one person from category (i) below and one or more persons from categories (i) or (ii):
(i) A farmer who has been farming in his/her own right for two years preceding the date on which the partnership is established.(ii) A person with an appropriate agriculture qualification whose contribution to the farm partnership entitles him/her to at least 20% of the profit sharing arrangement and, if over 41 on date of registration, has an annual off farm income of less than €40,000. It appears that the adjoining landowner may qualify under category (i), while you may qualify under category (i) or (ii) – depending on when you commenced your farming activities. Other persons not described in categories (i) and (ii) above, for example family members or a person with or without land, who wish to make an investment may also be registered as participants in the partnership, but will not have access in their own right to EU and State support scheme benefits that may accrue to the registered farm partnership. Interestingly, the new rules provide that a person may not be involved, either as a category (i) or (ii) partner in more than one registered farm partnership at any one time, which begs the question whether they can be a partner under the other person category in other farm partnerships.
The practical effect of this would be that the person would have to submit all their agricultural holdings and farming assets to one registered farm partnership and could only qualify once for Department scheme payments, but could potentially bring their expertise to other registered farm partnerships and share in the profits. Similar to the rules for registered MPPs, the partnership agreement must cover a minimum term of five years, although an exemption can be sought. The partners are obliged to submit all their agricultural holdings and farm assets into the farm partnership subject to limited exceptions, such as lands leased out to another user. The Department will assign a unique farm partnership reference number to each registered farm partnership, which will be used for applications to Department schemes. However, the DVO will continue to assign one or more herd numbers to the participants in the partnership.
The new rules provide that a registered farm partnership cannot be formed between independent holdings whose hubs are in excess of 50km apart, which has been significantly reduced from the 100km distance limit under the old rules. However, a derogation from the distance limit may be sought in exceptional circumstances. The new rules also provide that each registered farm partnership will be required to submit a copy of their Form 1 Partnership Tax Return on an annual basis.
SHARING OPTIONS