Question: My husband died unexpectedly last year, leaving me with the farm and a young family. It has been a very challenging period. My current dilemma relates to whether I should try to keep the farm going or whether to consider leasing it? We were dairying, but I have sold the cows and now we keep some calves and heifers.

On one hand, I want to try and keep farming because my children loved being out on the farm with their dad. On the other hand, I just do not know how I can juggle it all. Are there any drawbacks I should be aware of?

Answer: This is a difficult question being considered by you at what must be an incredibly difficult time. Suffice to say, the answer depends on your own personal circumstances, but I will set out a couple of legal and tax issues that you should consider which will help you make an informed decision.

Generally, the same tax reliefs that are available if you were farming the land are available if you are leasing the land for a minimum of a five year period. The ones affected by a decision to lease are Retirement Relief from Capital Gains Tax and Favourite Nephew/Niece Relief, and Business Relief as it relates to Capital Acquisitions Tax (gift/inheritance tax).

Retirement Relief from Capital Gains Tax

If you wish to transfer the land to your child/children during your lifetime, you will need to be able to qualify for Retirement Relief from Capital Gains Tax (CGT). If you plan on leaving the land to your child/children in your will, you need not worry about CGT as currently no CGT arises where property passes in a will.

However, if you wish to have the option of gifting it to them during your lifetime, you need to be able to qualify for Retirement Relief, which requires you to have owned and farmed the land for a minimum of 10 years before you start leasing it. It must be farmed for a continuous period of 10 years so that if you lease it before the 10 year period has been satisfied, you will need to start the clock all over again. However, once you achieve that 10 year farming period, you are then free to lease it for up to 25 years and under the current rules, it will not affect your ability to avail of Retirement Relief, should you wish to transfer or sell in the future.

Contract rearing arrangement

You could consider contract rearing replacement stock as an option instead of leasing. While your typical contract rearing arrangement involves the rearer taking in young stock at approximately six weeks and keeping them until they are ready to calve down, I would suggest you should adopt an alternative model.

You could form an arrangement with a dairy farmer for example, where you could take in either older calves or yearlings and keep them for the grazing season and return them to the stock owner to winter them.

This would take a lot of the work out of it for you. It would save you the hassle of going out and buying stock on an annual basis as you would take in the dairy farmer’s stock into your herd number to satisfy stocking rates, etc.

As far as the Department of Agriculture is concerned you are the owner of the stock, and thus legally responsible for their welfare, etc. The benefit for the stock owner is that the animals are out of their herd for nitrates and they get grazing for a reasonable cost. A contract rearing agreement is the legal document that protects the stock owner to prove that the stock is still in their ownership, notwithstanding that they are in your herd number.

It also regulates the relationship between the parties. There is a detailed precedent agreement available on the Teagasc website that you could adapt to suit your own circumstances.

The main benefit of the contract rearing arrangement is that it would allow you to continue to be actively farming, but it should lessen the workload. You would need to continue to make tax returns as a farmer showing inputs such as fertiliser, contractor costs, veterinary costs, etc, and outputs being the payments you receive from the Department of Agriculture, and the contract rearing fee you get from the stock owner.

You should be getting at least a rental equivalent as a return from the stock owner. It would also allow your children to be still involved in farming to some extent until they figure out whether it is something they want to do in the future.

Disclaimer: The information in this article is intended as a general guide only. While every care is taken to ensure accuracy of information contained in this article, Aisling Meehan, Agricultural Solicitors and Tax Consultants does not accept responsibility for errors or omissions howsoever arising. Email aisling@agrisolicitors.ie