Time to start farm transfer conversation

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It’s never too early to start the family conversation on farm transfers, according to Galway East TD Paul Connaughton.

‘No matter what age you are, what your family circumstances are, or how busy you currently are, no farmer can afford to delay work on farm transfer planning,’ according to the Fine Gael TD.

‘Far too many families never have the necessary conversation and the consequences have been and are dire for many families. Budget 2016 introduced some important changes in terms of farm inheritance and new family transfer partnerships, so now is a good time to start this conversation.

‘For very many farmers, the first step is to talk to the family solicitor and tease out issues in relation to farm title and while you’re talking to your solicitor, it’s a good time to make a will, which can be changed at a later date, but which is a very important first step. Sorting out title to land can be a lengthy process and that’s why it’s a good idea to begin at that point and get any necessary changes in motion well in advance of any transfer.

‘A solid education in terms of farming is an excellent starting point for any farmer. Too often, young farmers look on this as a hurdle to be overcome in terms of succession planning, but often it is only through forensically examining farm accounts or the benefits of various feedstuffs for different animals, that young people can begin to question their current farming operation and how it can be changed and improved. Taking a good look at the safety of your own farm is also a worthwhile element of any farm course and has helped make farms a safer place.

‘Getting the necessary educational requirements can be a slow process and once again, the earlier this is started the better. With many young farmers now working part-time and working shift work, full-time education is not always an option, but as work patterns have become increasingly complex, educational courses have become more flexible and there are many part-time options now to study for farming qualifications, including evening, weekend and short, intensive courses, so there should be something there to suit every lifestyle. We are fortunate in that such education is available locally and a call to the Agricultural College in Mountbellew or your local Teagasc office is always a good starting point.

‘Once measures are in train for land title and education, then it’s time to start putting a succession plan together. Various elements have to be considered, the value of the farm, a succession timeframe and the possible need for dual incomes.

‘The tax threshold for gift and inheritance tax was raised from €225,000 to €280,000 in Budget 2016 and there is a new farm succession tax credit, which is a significant shift and will result in much lower inheritance tax bills for many young farmers inheriting farms in county Galway.

‘Another newly introduced element is the Family Transfer Partnership. It will allow family members to enter into a partnership with a view to the phased transfer of a farm. Farm profits must be apportioned and the farm must be transferred to the younger farmer with an agreed timeframe, not more than ten years.

‘The introduction of the Family Transfer Partnership is a sensible measure. Many elderly farmers are reluctant to hand over ownership of the farm because they need to retain an income from the farm. The Family Transfer Partnership allows them to ensure that the change of ownership is a gradual process and gives financial security to those handing over the farm and those taking over. The partnership can be between parents and children and a favourite nephew or niece can also take over under the scheme. The big benefit of this scheme is a tax credit of €5,000 per annum for a total of five years. To avail of the tax incentive the young person must be under 40, so the sooner this conversation is started the better. To avail of the full benefit, the young person will have to be 35 or under entering the scheme. The tax credit is divided between the partners on the basis of the profit share agreement, so if the profit is halved 50/50, so too is the tax credit.

‘Another good measure under this scheme is that all of the land does not have to be transferred. 80% of the agricultural assets have to transfer at the end of the agreement, but this allows the older generation to retain some land for security.

‘Because this new arrangement has to be cleared in relation to EU state aid rules, it will be 2016 before the scheme gets underway, but with the current allocation of funding, it is anticipated that 2,000 family transfers could be initiated in 2016, which would provide security for those involved for a decade.

‘With so many elements to consider, it really is time that farmers of all ages began planning for succession. The current tax incentives make it worthwhile for both generations and not alone does this provide a legal framework within which different generations can operate, it also provides clarity and peace of mind for younger and older generations.’