QI am taking some land on a five-year lease from a neighbouring farmer. My son (19-years-old) wants to start farming in his own right. He is hoping to do an agriculture course next year. Should we take out the lease in his name?
A There are various legal, tax and practical considerations in determining in whose name to take out the lease, which will depend on your personal circumstances. However, some general considerations are as follows:
1Leasing income
tax exemption
From your neighbour’s viewpoint, he/she will want to qualify for the long-term lease income tax exemption. If your neighbour is 40-years-old or over, or is permanently incapacitated by reasons of mental or physical infirmity, and leases his/her land for a period of five years or more, up to €12,000 income from the lease should be exempt from income tax.
Assuming neither you nor your son is connected with your neighbour, i.e. a member of immediate family, in partnership, etc., either of you should qualify your neighbour for this income tax exemption.
However, you or your son must carry on farming on the leased land either solely or in partnership with persons who are also qualifying lessees.
2100% stock relief
From your son’s viewpoint, he will want to maximise the benefit he can receive from stock relief. Stock relief at a rate of 100% is available for young qualifying farmers for the tax year in which the individual begins farming and for the three successive tax years. The current scheme runs until 31 December 2015.
Qualifying farmers must meet the following conditions:
Have qualified for grant aid under the Scheme of Installation Aid for Young Trained Farmers, orCommenced farming in the year in which the claim is made, andSatisfied the minimum agricultural education requirements, i.e. Green Cert or its equivalent.Submitted a business plan to Teagasc, unless a business plan has otherwise been submitted to Teagasc or the Minister for Agriculture, Food and the Marine for any other purpose.As your son does not currently satisfy the minimum education requirements, he would not be entitled to claim stock relief at present. Consequently, you should plan what level of farming activity he will carry on over the next couple of years in order to make best use of 100% stock relief. See Table 1.
The Finance Act 2012 introduced a new restriction on the amount of relief that can be claimed. Previously, a farmer could claim an unlimited amount of stock relief at the 100% rate. However, the Finance Act 2012 restricted the (cash equivalent) amount of stock relief at the 100% rate which can be received by a qualifying farmer, who first qualifies as such in the year of assessment, 2012, or a subsequent year of assessment, to €40,000 in a single year of assessment and €70,000 in aggregate over the course of the scheme (i.e. four years).
3Young Farmers Scheme under CAP reform
From your son’s viewpoint, he will want to maximise the benefit he can receive under the Young Farmers Scheme.
While the final details of the scheme have not yet been published, the Department of Agriculture, Food and the Marine have indicated that in order to be eligible for the scheme, the applicant must be 40-years-old or less in the first year of basic payment scheme application, have established a holding within the previous five years (which can include leased land) and will more than likely be required to have minimum agricultural education requirement, i.e. Green Cert or its equivalent.
The scheme will provide a top-up on the basic payment scheme payment for young farmers for a maximum of five years from the date of the set up of the holding.
If your son does not have entitlements at present, he may have the right to entitlements under the National Reserve Scheme under the new basic payment scheme. Again, while the final details have not been confirmed it is likely that priority will be given to young farmers who are 40-years-old or less and set up in the preceding five years.
The Department of Agriculture Food and the Marine have signalled that there will be additional criteria, such as to have minimum agricultural education requirements,in order to qualify for basic payment scheme payments under the National Reserve.
It is clear from the foregoing that it is important for your son to have minimum agricultural education requirements in order to avail of different farming tax incentives and schemes.
Consequently, his focus should be on attaining these agricultural educational requirements to maximise the value of these incentives and schemes when he starts farming in his own right.
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, does not accept responsibility for errors or omissions. E-mail ameehan@farmersjournal.ie
QI am taking some land on a five-year lease from a neighbouring farmer. My son (19-years-old) wants to start farming in his own right. He is hoping to do an agriculture course next year. Should we take out the lease in his name?
A There are various legal, tax and practical considerations in determining in whose name to take out the lease, which will depend on your personal circumstances. However, some general considerations are as follows:
1Leasing income
tax exemption
From your neighbour’s viewpoint, he/she will want to qualify for the long-term lease income tax exemption. If your neighbour is 40-years-old or over, or is permanently incapacitated by reasons of mental or physical infirmity, and leases his/her land for a period of five years or more, up to €12,000 income from the lease should be exempt from income tax.
Assuming neither you nor your son is connected with your neighbour, i.e. a member of immediate family, in partnership, etc., either of you should qualify your neighbour for this income tax exemption.
However, you or your son must carry on farming on the leased land either solely or in partnership with persons who are also qualifying lessees.
2100% stock relief
From your son’s viewpoint, he will want to maximise the benefit he can receive from stock relief. Stock relief at a rate of 100% is available for young qualifying farmers for the tax year in which the individual begins farming and for the three successive tax years. The current scheme runs until 31 December 2015.
Qualifying farmers must meet the following conditions:
Have qualified for grant aid under the Scheme of Installation Aid for Young Trained Farmers, orCommenced farming in the year in which the claim is made, andSatisfied the minimum agricultural education requirements, i.e. Green Cert or its equivalent.Submitted a business plan to Teagasc, unless a business plan has otherwise been submitted to Teagasc or the Minister for Agriculture, Food and the Marine for any other purpose.As your son does not currently satisfy the minimum education requirements, he would not be entitled to claim stock relief at present. Consequently, you should plan what level of farming activity he will carry on over the next couple of years in order to make best use of 100% stock relief. See Table 1.
The Finance Act 2012 introduced a new restriction on the amount of relief that can be claimed. Previously, a farmer could claim an unlimited amount of stock relief at the 100% rate. However, the Finance Act 2012 restricted the (cash equivalent) amount of stock relief at the 100% rate which can be received by a qualifying farmer, who first qualifies as such in the year of assessment, 2012, or a subsequent year of assessment, to €40,000 in a single year of assessment and €70,000 in aggregate over the course of the scheme (i.e. four years).
3Young Farmers Scheme under CAP reform
From your son’s viewpoint, he will want to maximise the benefit he can receive under the Young Farmers Scheme.
While the final details of the scheme have not yet been published, the Department of Agriculture, Food and the Marine have indicated that in order to be eligible for the scheme, the applicant must be 40-years-old or less in the first year of basic payment scheme application, have established a holding within the previous five years (which can include leased land) and will more than likely be required to have minimum agricultural education requirement, i.e. Green Cert or its equivalent.
The scheme will provide a top-up on the basic payment scheme payment for young farmers for a maximum of five years from the date of the set up of the holding.
If your son does not have entitlements at present, he may have the right to entitlements under the National Reserve Scheme under the new basic payment scheme. Again, while the final details have not been confirmed it is likely that priority will be given to young farmers who are 40-years-old or less and set up in the preceding five years.
The Department of Agriculture Food and the Marine have signalled that there will be additional criteria, such as to have minimum agricultural education requirements,in order to qualify for basic payment scheme payments under the National Reserve.
It is clear from the foregoing that it is important for your son to have minimum agricultural education requirements in order to avail of different farming tax incentives and schemes.
Consequently, his focus should be on attaining these agricultural educational requirements to maximise the value of these incentives and schemes when he starts farming in his own right.
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, does not accept responsibility for errors or omissions. E-mail ameehan@farmersjournal.ie
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