“I added my son’s name to my herd number earlier this year to qualify for the National Reserve and the Young Farmers Scheme. I read that farming under a joint herd number could be seen to be a partnership and, consequently, it could pass ownership of part of the farm to my son as joint owner? Could my son argue that he has the right to lay claim to part of the farm?”
Yes, potentially. The Partnership Act 1890 provides that where land is bought with partnership funds, there is a rebuttable presumption that the land is partnership property and so on a dissolution of the partnership (such as the death of a partner), the land could be sold with the proceeds divided up according to the profit sharing ratio.
Given the fact that most farms operating under a joint herd number could be regarded as a partnership, it is advisable to have a partnership agreement drawn up to specify who owns what and what is to happen when the joint herd number/partnership comes to an end.
The Department of Agriculture has produced clear guidance on the issue where it takes no responsibility for determining who owns what stock in a herd number.
A herd number issued by the Department to any particular individual acting as the keeper does not infer ownership of lands or any animals tested under that herd number. Consequently, if either party in a joint herd number claims ownership to stock, this should be recorded in a written agreement between the parties, otherwise stock could be divided up according to the profit sharing ratio covered below.
Farm partnerships
In 2006, the IFA successfully concluded negotiations with the Department of Social and Family Affairs, and Revenue, on the criteria used by them in determining the existence of a partnership in a farming situation. They have stated that they deem a partnership to be in existence if some of the following factors apply:
There is a written partnership agreement.Each partner writes cheques on the business accounts in his/her own right.There is a joint business account.It is apparent to those doing business with the partnership that a partnership exists.Business accounts/activities are in joint names of the partners.Each partner makes a significant contribution to the running of the business.The business is owned jointly by the partnership.The profits and losses of the partnership are shared by each partner.The same criteria may be applied in the context of joint herd numbers. In order to apply for the National Reserve/Young Farmers Scheme under the joint herd number category, the following was required:
A bank statement or letter from the bank confirming the young farmer’s name is on the bank account to which direct payments would be paid.A declaration completed by each member of the group and witnessed by a solicitor confirming that the young farmer has effective control, either solely or jointly, with other members of the group in terms of decisions related to the management, benefits and financial risks to the group.I understand that the majority of these arrangements are set up so that the young farmer gets a minimum of 20% of the profit generated. As a result, a joint herd number has many of the characteristics of a partnership and could be deemed to be so.
Partnership Act 1890
The Partnership Act 1890 provides that there is a rebuttable presumption of partnership where there is a sharing of profits. In the absence of any agreement to the contrary, where partners share profits in a certain manner this is the profit-sharing ratio applicable to the partnership.
On the dissolution of the partnership, a partner is entitled to have the partnership assets sold, the liabilities paid off and the surplus divided in the profit sharing ratios. All property brought into a partnership or acquired on account of the partnership for the purposes of the partnership business is partnership property.
Teagasc Specimen Farm Partnership Agreement
If the parties do not want the default provisions of the Partnership Act 1890 to apply, they should enter into a written partnership agreement specifying what the parties have agreed themselves.
The Teagasc specimen farm partnership agreement provides that it is expressly agreed that the lands, milk quota rights and basic payment scheme entitlements made available for use by the partnership shall not be or form part of the partnership property or partnership capital, but shall remain the property of the respective partners insofar as the relevant provisions allow. However, it provides that any property acquired with partnership assets or for the benefit of the partnership standing in the name of any particular partner shall be held on trust by that partner for the partners in their respective shares, save where the contrary is explicitly provided by agreement.
It might be worth looking into forming a registered farm partnership whereby you could secure additional stock relief and a double ceiling for the new TAMS II grant. You could recover 50% of the cost of legal, advisory and financial services advice in putting the registered farm partnership in place through the collaborative farming grant recently announced by the Department.
“I added my son’s name to my herd number earlier this year to qualify for the National Reserve and the Young Farmers Scheme. I read that farming under a joint herd number could be seen to be a partnership and, consequently, it could pass ownership of part of the farm to my son as joint owner? Could my son argue that he has the right to lay claim to part of the farm?”
Yes, potentially. The Partnership Act 1890 provides that where land is bought with partnership funds, there is a rebuttable presumption that the land is partnership property and so on a dissolution of the partnership (such as the death of a partner), the land could be sold with the proceeds divided up according to the profit sharing ratio.
Given the fact that most farms operating under a joint herd number could be regarded as a partnership, it is advisable to have a partnership agreement drawn up to specify who owns what and what is to happen when the joint herd number/partnership comes to an end.
The Department of Agriculture has produced clear guidance on the issue where it takes no responsibility for determining who owns what stock in a herd number.
A herd number issued by the Department to any particular individual acting as the keeper does not infer ownership of lands or any animals tested under that herd number. Consequently, if either party in a joint herd number claims ownership to stock, this should be recorded in a written agreement between the parties, otherwise stock could be divided up according to the profit sharing ratio covered below.
Farm partnerships
In 2006, the IFA successfully concluded negotiations with the Department of Social and Family Affairs, and Revenue, on the criteria used by them in determining the existence of a partnership in a farming situation. They have stated that they deem a partnership to be in existence if some of the following factors apply:
There is a written partnership agreement.Each partner writes cheques on the business accounts in his/her own right.There is a joint business account.It is apparent to those doing business with the partnership that a partnership exists.Business accounts/activities are in joint names of the partners.Each partner makes a significant contribution to the running of the business.The business is owned jointly by the partnership.The profits and losses of the partnership are shared by each partner.The same criteria may be applied in the context of joint herd numbers. In order to apply for the National Reserve/Young Farmers Scheme under the joint herd number category, the following was required:
A bank statement or letter from the bank confirming the young farmer’s name is on the bank account to which direct payments would be paid.A declaration completed by each member of the group and witnessed by a solicitor confirming that the young farmer has effective control, either solely or jointly, with other members of the group in terms of decisions related to the management, benefits and financial risks to the group.I understand that the majority of these arrangements are set up so that the young farmer gets a minimum of 20% of the profit generated. As a result, a joint herd number has many of the characteristics of a partnership and could be deemed to be so.
Partnership Act 1890
The Partnership Act 1890 provides that there is a rebuttable presumption of partnership where there is a sharing of profits. In the absence of any agreement to the contrary, where partners share profits in a certain manner this is the profit-sharing ratio applicable to the partnership.
On the dissolution of the partnership, a partner is entitled to have the partnership assets sold, the liabilities paid off and the surplus divided in the profit sharing ratios. All property brought into a partnership or acquired on account of the partnership for the purposes of the partnership business is partnership property.
Teagasc Specimen Farm Partnership Agreement
If the parties do not want the default provisions of the Partnership Act 1890 to apply, they should enter into a written partnership agreement specifying what the parties have agreed themselves.
The Teagasc specimen farm partnership agreement provides that it is expressly agreed that the lands, milk quota rights and basic payment scheme entitlements made available for use by the partnership shall not be or form part of the partnership property or partnership capital, but shall remain the property of the respective partners insofar as the relevant provisions allow. However, it provides that any property acquired with partnership assets or for the benefit of the partnership standing in the name of any particular partner shall be held on trust by that partner for the partners in their respective shares, save where the contrary is explicitly provided by agreement.
It might be worth looking into forming a registered farm partnership whereby you could secure additional stock relief and a double ceiling for the new TAMS II grant. You could recover 50% of the cost of legal, advisory and financial services advice in putting the registered farm partnership in place through the collaborative farming grant recently announced by the Department.
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