Farm partnership agreements can enable the gradual transfer of land from one generation to the next, Teagasc farm business structures specialist Gordon Peppard has said.

Speaking at a recent IFA farm succession meeting, Peppard told farmers that such an exercise has to be a “win-win” for all parties, with clear planning and communication before the partnership begins and throughout its existence.

“[Partnerships] are structures where two or more farmers work together. They have a formal arrangement and that arrangement is for a mutual benefit. It needs to be a win-win situation for everyone involved in it or it will not work,” he said.

Benefits

Peppard described how farm partnerships can help solve some of the agriculture sector’s challenges such as farm age profiles, labour shortages and land availability.

“These arrangements are generally the pooling of skills and resources. For example, the experienced farmer could be bringing years of experience, knowing the local land.

“A young person then could be bringing skills back from agricultural college, their experiences and the drive and enthusiasm to drive the farm forward,” he added.

The Teagasc farm partnership expert said that on a financial level, partnership farmers can avail of associated tax benefits and may be able to then access the CAP Young Farmers Scheme.

Physically, two farmers are sharing the workload on farm, rather than one. “Parents can go away for a weekend away. It works vice versa,” Peppard added.

“There’s a business plan there. Everyone knows they have responsibilities. Farms can be lonely places and when there’s two or three there, it reduces isolation but also improves health and safety.”

Succession farm partnership

Specifically, succession farm partnerships are aimed at incentivising generational renewal in Irish agriculture and they featured strongly in the farmer discussion at the IFA meeting.

It’s an agreement that the current landowner will guarantee to transfer a minimum of 80% of the farm assets after the end of year three of the partnership and before the end of year 10.

“If you go into a succession farm partnership, the partnership gets a €5,000 tax credit for a maximum of five years. The successor must be under 40 and it doesn’t apply to companies,” Peppard explained.

Teagasc farm business structures specialist Gordon Peppard. \ Donal O'Leary

He also highlighted that if the successor partner in the agreement is approaching their 32nd birthday, care must be taken to avoid the 35-year cut off for lifetime farm transfer tax benefits.

Share-farming

Peppard warned of the implications of a separate but also common agreement, share-farming, which involves two separate businesses running on the same land.

“There is no rent. It cannot be a landlord or tenant situation. This is the pure sharing of inputs and outputs.

“You need to sit down and do the homework with the person you’re going into business with. You need to complete your own budgets and make sure that it financially stacks up and that you’re going to be able to pull out of this.

“You have to work in tandem with someone else. You need to make sure that there’s good communication. Everyone knows the responsibility and at the end of the year you finalise your own accounts and you pay your own tax,” he said.

The Teagasc representative also noted the importance of having a share-farming exit plan.

“How do you get out? Who owns the cows? Who owns the fertiliser that’s in the yard? That needs to be decided day one,” he said.

Outlook

Peppard said that 95% of the partnerships he deals with are family farm partnerships and suggested that there could be more scope for farm partnerships between non-family members.

“Farms coming together to increase scale. Maybe if there’s someone on one of the farms that wants to step back a bit or retire but maybe still be involved with their land.”

Farmers at recent IFA farm succession meetings asked a number of questions on partnership agreements. \ Donal O'Leary

He said that in recent years, there “definitely” are a lot more people returning home to get a site or to live back on the home farm.

“You’d hope that maybe that would generate some interest and that young people would become more involved again in the day-to-day running of the farm rather than going off to work in some of the bigger cities,” he added.

Peppard suggested that such an “opportunity”, post COVID-19, could be capitalised on through further uptake in farm partnership agreements.

Case studies

Dairy farmer, successor identified

John (52) is milking 140 cows on 150ac in Co Cork.

His wife, Mary, works off-farm and they have three children – Tom, 25, and two younger siblings still in third-level education. Tom studied agriculture and now has an interest in farming.

John and Mary have commitments such as recently bought land and two kids still to complete their education. Because of this, and his age, John is not ready to fully step back from the farm.

“John knows Tom won’t be there in 10 years’ time, when he really needs him to take over, if he doesn’t do something now and get him involved in the farm,” Peppard said.

John and Mary face the option of transferring the farm straight to Tom and allowing him to become the sole trader or an interim arrangement could be a registered farm partnership.

“Over time then, the land could be gifted or inherited and Tom becomes the successor or there could be an additional step of a succession farm partnership put in,” he added.

Drystock farmer, successor identified but not ready

Pat and Bríd are in their 70s and farm drystock on 85ac in Co Wexford. They want to step back and enjoy life.

Their daughter Sarah, 40, has an interest in farming but is an engineer in London and is not ready to move home. Their son, Michael, has a corporate job in Co Mayo, has a young family in primary school, a house, and no interest in farming or returning to Wexford.

Sarah is identified as the successor but due to work commitments she’s staying in England for the meantime.

A neighbour of Pat and Bríd’s, Andy, 29, is interested in farming and is working part-time with Pat. However, he has no access to land.

Until Sarah is ready to come home, an interim arrangement is made where Pat forms a registered farm partnership with Andy.

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