A farm walk was held on TJ and Christopher Tuffy’s leased farm in Donnally, Co Sligo. It was organised by IFAC, Aurivo and Teagasc. The theme of the walk was all about building a successful farm partnership. The father-and-son duo formed a partnership after Christopher finished up his course in advanced dairy herd management in Kildalton Agricultural College in 2010. The Tuffys story is very interesting because in 2011 they took on a 150-acre (135-acre adjusted) farm in a 15-year lease and converted it into a dairy operation. TJ had already been farming on the 65-acre home block in Enniscrone but he said it wasn’t big enough to sustain two incomes.
“Christopher wanted to go farming so we needed a bigger farm, otherwise he would be gone elsewhere,” said TJ. The new leased block (previously Sligo AI station) was in poor condition when they took it over, it had become covered in rushes and the soil indexes were all low. The lack of dairy infrastructure also meant that it would take a considerable amount of money to get it up and running. “AIB adverts say they are backing brave, and in fairness, they are,” joked TJ.
“We reseeded three quarters of the farm in 2011, put in roadways and a water system, converted an existing slatted shed to cubicles and built a parlour,” said Christopher. The farm was ready for cows in April 2012 and Christopher has been running it since. They now milk over 140 cows on the leased block. “Dad manages the home farm where he looks after young stock and main-cut silage,” Christopher explained. Once calves are 10 days old they leave the lease block and are reared on the home farm. They return to the lease block as in-calf heifers in two years’ time.
Christopher said having a formal partnership meant a lot to him when he started farming. “You take on a lot more responsibility when you see your name on the milk cheque and the cheque book,” he explained. He did warn that no young farmer should expect to be handed over the reins straight away when they finish college. Christopher, for example, spent time working on a large dairy farm in New Zealand where he learned about managing a large-scale operation. “I think every young lad should prove themselves first that they are capable of driving the business and making good decisions,” he warned.
Thomas Curran and Cian Devaney Teagasc; Christopher Tuffy, host farmer; Mary Phelan, IFAC; TJ Tuffy, host farmer; Vincent Griffith and Enda Faulkner, Aurivo at the "Building a successful farm partnership" farm walk on the Tuffys farm.
The Tuffys agreed that the partnership had mutual benefits. TJ could take a step back from the day-to-day running of the main enterprise but all the while stay involved in decision making. Similarly, Christopher could focus on the business but still receive guidance from his father.
At the beginning of this year the Tuffys moved from a partnership to a company structure because their tax allowances were running up and the business was turning healthy profits to justify the change.
Partnerships
Thomas Curran, farm business structures specialist with Teagasc said that the key consideration for all collaborative arrangements is that the arrangement must be beneficial to all parties. He said the key benefit of the partnership models is the gradual transfer of management and decision making from one generation to the next in a way that recognises and values the contributions of both generations.
“The partnership must be built on mutual respect, trust, honesty and commitment to the farm business by both parties,” according to Thomas.
For example parents must adjust to working with the successor as an equal rather than a parent-son/daughter relationship. Decisions are taken jointly or as a group with all partners involved. The successor must show commitment, take initiative and get more involved in the decision making, strategic and financial management as well as the physical work explained Thomas. He said in a family partnership the minimum profit share is 80:20.
“The trained farmer must get at least 20% of the profits. After this there are no guidelines. It is very much up to the family and the circumstances of the parents and the son/daughter and their respective requirements for income from the farm. The profit share can be adjusted from year to year as circumstances change,” he said.
Thomas says it costs up to €3,000 excluding VAT to set up a partnership but there is a 50% grant towards the set up costs on successful registration.
There are also financial benefits including:
100% stock relief for the young farmer on their share of the value of the uplift in stock values. The share is based on the profit sharing ratio. 50% stock relief for three years subject to a maximum of €15,000.Maximising the 20% tax band as all partners are taxed individually.€5,000 tax credit for succession farm partnership. The succession farm partnership differs from a standard partnership. It was launched by the Minster in 2017 and this provides an incentive for farmers to plan the transfer of assets. To set up a succession farm partnership you must:?Form a registered farm partnership as normal.
?Agree to transfer 80% of farm assets within three to five years.
?Farm assets: land, buildings, livestock, machinery and BPS entitlements.
?Complete Teagasc My Farm, My Plan.
CAP
Access to the Young Farmer Scheme (provided education is complete).Access to national reserve (provided education is complete).Double threshold of investment under TAMS II (€80,000 × 2). If partnership has young farmer the first €80,000 is at 60%, if not the double threshold is at 40%.Tax planning
Declan McEvoy from IFAC says every farm and situation is different which makes it impossible to give a one size fits all advice on how to structure the business. He says farmers should take a ‘helicopter’ approach to planning.
“Where do you see the business going? Will there be rapid expansion? Are you going to have a very profitable business? Are you slowing down?” asked Declan.
He said a registered farm partnership might be a good idea if there is a lot of building work to do, especially if there is going to be a young trained farmer in the partnership. This can also be used as a stepping stone to succession.
“The registered partnership means the TAMS II grant ceiling doubles, which is useful if there is a lot of capital investments required,” Declan explained. However, if the business is expected to have high profits from the start, it might be best to form a company from the outset.
“With a company, the main benefit is that the overall tax rate is lower at 12.5%, which is very beneficial for high-profit businesses. Farmers trading in a company usually lease the land to the company and use salary/rent from the company to run the household.
“The salary/rent turn into a farmer’s personal income, which is taxed in the normal way. If they were very high, then you might have to reconsider if a company would be worthwhile in terms of reducing your overall tax bill,” said Declan.
He gave the example of a farm with an annual profit of €150,000. A farmer in a sole-trading arrangement might have to pay €60,000 in tax for that year because he would qualify for the higher rates of 52% income tax. In a company structure the tax bill could be as low as €25,000 which includes the company and personal tax.
Retained profits in the company can be used as cash reserves, to make further investments in the business, used in pensions or to buy land he said.
Declan insists that every case and circumstance is different and that is why farmers should seek advice with a view to the future before opting for a particular structure.
A farm walk was held on TJ and Christopher Tuffy’s leased farm in Donnally, Co Sligo. It was organised by IFAC, Aurivo and Teagasc. The theme of the walk was all about building a successful farm partnership. The father-and-son duo formed a partnership after Christopher finished up his course in advanced dairy herd management in Kildalton Agricultural College in 2010. The Tuffys story is very interesting because in 2011 they took on a 150-acre (135-acre adjusted) farm in a 15-year lease and converted it into a dairy operation. TJ had already been farming on the 65-acre home block in Enniscrone but he said it wasn’t big enough to sustain two incomes.
“Christopher wanted to go farming so we needed a bigger farm, otherwise he would be gone elsewhere,” said TJ. The new leased block (previously Sligo AI station) was in poor condition when they took it over, it had become covered in rushes and the soil indexes were all low. The lack of dairy infrastructure also meant that it would take a considerable amount of money to get it up and running. “AIB adverts say they are backing brave, and in fairness, they are,” joked TJ.
“We reseeded three quarters of the farm in 2011, put in roadways and a water system, converted an existing slatted shed to cubicles and built a parlour,” said Christopher. The farm was ready for cows in April 2012 and Christopher has been running it since. They now milk over 140 cows on the leased block. “Dad manages the home farm where he looks after young stock and main-cut silage,” Christopher explained. Once calves are 10 days old they leave the lease block and are reared on the home farm. They return to the lease block as in-calf heifers in two years’ time.
Christopher said having a formal partnership meant a lot to him when he started farming. “You take on a lot more responsibility when you see your name on the milk cheque and the cheque book,” he explained. He did warn that no young farmer should expect to be handed over the reins straight away when they finish college. Christopher, for example, spent time working on a large dairy farm in New Zealand where he learned about managing a large-scale operation. “I think every young lad should prove themselves first that they are capable of driving the business and making good decisions,” he warned.
Thomas Curran and Cian Devaney Teagasc; Christopher Tuffy, host farmer; Mary Phelan, IFAC; TJ Tuffy, host farmer; Vincent Griffith and Enda Faulkner, Aurivo at the "Building a successful farm partnership" farm walk on the Tuffys farm.
The Tuffys agreed that the partnership had mutual benefits. TJ could take a step back from the day-to-day running of the main enterprise but all the while stay involved in decision making. Similarly, Christopher could focus on the business but still receive guidance from his father.
At the beginning of this year the Tuffys moved from a partnership to a company structure because their tax allowances were running up and the business was turning healthy profits to justify the change.
Partnerships
Thomas Curran, farm business structures specialist with Teagasc said that the key consideration for all collaborative arrangements is that the arrangement must be beneficial to all parties. He said the key benefit of the partnership models is the gradual transfer of management and decision making from one generation to the next in a way that recognises and values the contributions of both generations.
“The partnership must be built on mutual respect, trust, honesty and commitment to the farm business by both parties,” according to Thomas.
For example parents must adjust to working with the successor as an equal rather than a parent-son/daughter relationship. Decisions are taken jointly or as a group with all partners involved. The successor must show commitment, take initiative and get more involved in the decision making, strategic and financial management as well as the physical work explained Thomas. He said in a family partnership the minimum profit share is 80:20.
“The trained farmer must get at least 20% of the profits. After this there are no guidelines. It is very much up to the family and the circumstances of the parents and the son/daughter and their respective requirements for income from the farm. The profit share can be adjusted from year to year as circumstances change,” he said.
Thomas says it costs up to €3,000 excluding VAT to set up a partnership but there is a 50% grant towards the set up costs on successful registration.
There are also financial benefits including:
100% stock relief for the young farmer on their share of the value of the uplift in stock values. The share is based on the profit sharing ratio. 50% stock relief for three years subject to a maximum of €15,000.Maximising the 20% tax band as all partners are taxed individually.€5,000 tax credit for succession farm partnership. The succession farm partnership differs from a standard partnership. It was launched by the Minster in 2017 and this provides an incentive for farmers to plan the transfer of assets. To set up a succession farm partnership you must:?Form a registered farm partnership as normal.
?Agree to transfer 80% of farm assets within three to five years.
?Farm assets: land, buildings, livestock, machinery and BPS entitlements.
?Complete Teagasc My Farm, My Plan.
CAP
Access to the Young Farmer Scheme (provided education is complete).Access to national reserve (provided education is complete).Double threshold of investment under TAMS II (€80,000 × 2). If partnership has young farmer the first €80,000 is at 60%, if not the double threshold is at 40%.Tax planning
Declan McEvoy from IFAC says every farm and situation is different which makes it impossible to give a one size fits all advice on how to structure the business. He says farmers should take a ‘helicopter’ approach to planning.
“Where do you see the business going? Will there be rapid expansion? Are you going to have a very profitable business? Are you slowing down?” asked Declan.
He said a registered farm partnership might be a good idea if there is a lot of building work to do, especially if there is going to be a young trained farmer in the partnership. This can also be used as a stepping stone to succession.
“The registered partnership means the TAMS II grant ceiling doubles, which is useful if there is a lot of capital investments required,” Declan explained. However, if the business is expected to have high profits from the start, it might be best to form a company from the outset.
“With a company, the main benefit is that the overall tax rate is lower at 12.5%, which is very beneficial for high-profit businesses. Farmers trading in a company usually lease the land to the company and use salary/rent from the company to run the household.
“The salary/rent turn into a farmer’s personal income, which is taxed in the normal way. If they were very high, then you might have to reconsider if a company would be worthwhile in terms of reducing your overall tax bill,” said Declan.
He gave the example of a farm with an annual profit of €150,000. A farmer in a sole-trading arrangement might have to pay €60,000 in tax for that year because he would qualify for the higher rates of 52% income tax. In a company structure the tax bill could be as low as €25,000 which includes the company and personal tax.
Retained profits in the company can be used as cash reserves, to make further investments in the business, used in pensions or to buy land he said.
Declan insists that every case and circumstance is different and that is why farmers should seek advice with a view to the future before opting for a particular structure.
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