The introduction of a €25,000 tax credit for succession farm partnerships was announced in the Budget of 12 months ago. However, the measure was subject to EU State Aid Approval, which has recently been received, as confirmed by Minister Creed at the Women and Agriculture conference last week.
Succession farm partnerships may be described as a succession planning model that encourages older farmers to form partnerships with young, trained farmers and to transfer ownership of the farm, within 10 years, to that young, trained farmer.
Each partner in the partnership will be entitled to a tax credit of up to €5,000/year, divided between the partners, in accordance with the profit-sharing ratio specified in the partnership agreement.
This tax credit is available for five years from the date the partnership is registered, unless the successor has reached 40 years of age, in which case the tax credit is payable only for so long as the successor is younger than 40.
It is proposed that a register of succession farm partnerships will be established by the Department of Agriculture, similar to the current register for farm partnerships.
In order to be registered and avail of the tax credits, the partnership must comply with all of the following conditions:
a) The farm partnership must have at least two members, each of whom shall be a natural person (not a company).
b) Of the members of the farm partnership:
i. At least one partner must have been farming on at least three hectares of land for at least two years immediately before the formation of the partnership (the “farmer”).
ii. Of the others, each partner must have an agri qualification (ie the Green Cert or its equivalent) and be entitled to at least 20% of the profits of the partnership and shall not have reached 40 years of age before registration (the “successor”).
c) Obtain approval from the Minister for the business plan of the registered farm partnership before making an application for registration.
d) The farmer must enter an agreement with the successor to transfer at least 80% of the farm assets to the successor within 10 years of the commencement of the partnership, which transfer can begin after year three.
e) The terms of the partnership agreement shall include:
a. The farm assets of the partnership on the day the application is made for registration.
b. Any conditions to which the transfer or sale will be subject.
c. The year in which the proposed transfer may take place.
d. Any other terms agreed between the farmer and successor, such as the conduct of the farming trade or creation of any rights of residence in dwellings on the land.
If at least 80% of the farm assets are not transferred within the 10-year deadline, there will be a clawback of the tax credits claimed.
Other benefits of registered farm partnerships
1)Taxation:
a. Access to 100% stock relief on income tax for young, trained farmers for four years.
b. Enhanced 50% stock relief for other partners.
c. Maximising low rate of tax through the sharing of profits.
2) Young Farmer Scheme and National Reserve Scheme if/when same re-opens:
a. 25% top-up of national average Basic Payment Scheme payment.
b. Access to new entitlements or top-up on existing entitlements from the National Reserve.
3) Targeted Agricultural Modernisation Scheme Grant:
Doubling of investment ceiling (€80,000 vs €160,000)
4) Green Carbon Low Emissions Scheme/Areas of Natural Constraints Payment:
Two applications where partners have previously been separate farmers.
5) Collaborative Farming Grant:
A50% grant for the vouched (VAT exclusive) cost for each of the legal, advisory and financial services secured in the drawing up of the Farm Partnership Agreement, up to a maximum payment of €2,500.
There is a specimen Farm Partnership Agreement and On Farm Agreement available on the Department of Agriculture website.
The rules require the partnership to operate through a bank account opened in the name of the partners.
While most partnerships operate through a common herd number, the DVO can assign further herd numbers, depending on where the partnership lands are located.
An application form for registration of the farm partnership and further information in relation to the application is available on the Department of Agriculture website (www.agriculture.gov.ie).
The relief is subject to a Commencement Order pending State Aid Approval by the European Commission. Thus, as the approval has been granted, it is hoped that the Commencement Order will be signed off by the Minister shortly to enable farm families to begin availing of the relief.
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Full coverage: legal queries
The introduction of a €25,000 tax credit for succession farm partnerships was announced in the Budget of 12 months ago. However, the measure was subject to EU State Aid Approval, which has recently been received, as confirmed by Minister Creed at the Women and Agriculture conference last week.
Succession farm partnerships may be described as a succession planning model that encourages older farmers to form partnerships with young, trained farmers and to transfer ownership of the farm, within 10 years, to that young, trained farmer.
Each partner in the partnership will be entitled to a tax credit of up to €5,000/year, divided between the partners, in accordance with the profit-sharing ratio specified in the partnership agreement.
This tax credit is available for five years from the date the partnership is registered, unless the successor has reached 40 years of age, in which case the tax credit is payable only for so long as the successor is younger than 40.
It is proposed that a register of succession farm partnerships will be established by the Department of Agriculture, similar to the current register for farm partnerships.
In order to be registered and avail of the tax credits, the partnership must comply with all of the following conditions:
a) The farm partnership must have at least two members, each of whom shall be a natural person (not a company).
b) Of the members of the farm partnership:
i. At least one partner must have been farming on at least three hectares of land for at least two years immediately before the formation of the partnership (the “farmer”).
ii. Of the others, each partner must have an agri qualification (ie the Green Cert or its equivalent) and be entitled to at least 20% of the profits of the partnership and shall not have reached 40 years of age before registration (the “successor”).
c) Obtain approval from the Minister for the business plan of the registered farm partnership before making an application for registration.
d) The farmer must enter an agreement with the successor to transfer at least 80% of the farm assets to the successor within 10 years of the commencement of the partnership, which transfer can begin after year three.
e) The terms of the partnership agreement shall include:
a. The farm assets of the partnership on the day the application is made for registration.
b. Any conditions to which the transfer or sale will be subject.
c. The year in which the proposed transfer may take place.
d. Any other terms agreed between the farmer and successor, such as the conduct of the farming trade or creation of any rights of residence in dwellings on the land.
If at least 80% of the farm assets are not transferred within the 10-year deadline, there will be a clawback of the tax credits claimed.
Other benefits of registered farm partnerships
1)Taxation:
a. Access to 100% stock relief on income tax for young, trained farmers for four years.
b. Enhanced 50% stock relief for other partners.
c. Maximising low rate of tax through the sharing of profits.
2) Young Farmer Scheme and National Reserve Scheme if/when same re-opens:
a. 25% top-up of national average Basic Payment Scheme payment.
b. Access to new entitlements or top-up on existing entitlements from the National Reserve.
3) Targeted Agricultural Modernisation Scheme Grant:
Doubling of investment ceiling (€80,000 vs €160,000)
4) Green Carbon Low Emissions Scheme/Areas of Natural Constraints Payment:
Two applications where partners have previously been separate farmers.
5) Collaborative Farming Grant:
A50% grant for the vouched (VAT exclusive) cost for each of the legal, advisory and financial services secured in the drawing up of the Farm Partnership Agreement, up to a maximum payment of €2,500.
There is a specimen Farm Partnership Agreement and On Farm Agreement available on the Department of Agriculture website.
The rules require the partnership to operate through a bank account opened in the name of the partners.
While most partnerships operate through a common herd number, the DVO can assign further herd numbers, depending on where the partnership lands are located.
An application form for registration of the farm partnership and further information in relation to the application is available on the Department of Agriculture website (www.agriculture.gov.ie).
The relief is subject to a Commencement Order pending State Aid Approval by the European Commission. Thus, as the approval has been granted, it is hoped that the Commencement Order will be signed off by the Minister shortly to enable farm families to begin availing of the relief.
Read more
Full coverage: legal queries
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