What are the financial benefits of forming a farm partnership ?

A farm partnership is a legal business arrangement where two or more individuals come together combining their respective resources to achieve mutual benefits. Assuming that one of the partners qualifies as a “young trained farmer” there are financial advantages to be enjoyed as well as the commercial benefits.

The financial advantages of a registered farm partnership are difficult to ignore.  A registered farm partnership will enjoy both taxation benefits as well as an enhanced entitlement to department of agriculture payments.

From a tax perspective the sharing of the farming profits between a parent and child should see a reduction in the overall tax liability. Based on current taxation rates and bands.

• Assuming your child is single they will pay tax at 20% on the first €33,800 of their share of the farm profits.
• If your spouse has no income, you will pay tax at 20% on the first €42,800.

This means that farming profits of up to €76,600 could be charged to tax at the 20% rate depending on the split of the profits in the partnership and profit levels.

• If your spouse were to become a partner in the business and it is their only income that figure could be as high as €101,400, again depending on the partnership split and profit levels.

Enhanced stock relief is also available to registered farm partners. A young trained farmer will enjoy stock relief of 100% of the increase in value of livestock for the first four years for their share of the farm profits. The other partners in the partnership benefit from 50% stock relief on their profit portion, an increase from the normal rate of 25%. However, there are limits on the value of the relief that may be claimed.

Where your son qualifies as a young trained farmer and forms a registered farm partnership with you, they could receive a Basic Payment Scheme top-up of €60 on the first 50 activated entitlements. This can amount to a potential payment of up to €3,000 per year for up to five years depending on the number of years the young person is eligible for. In addition, if the young trained farmer owns or leases land that has no, or even low level entitlements, they can apply to have new entitlements allocated (or low level entitlements topped up) out of the national reserve. In terms of capital expenditure a registered farming partnership can qualify for enhanced levels of grant assistance for qualifying capital expenditure.

Before any of the benefits outlined above will apply the partnership must be properly constituted. This will involve:-

1. registering the partnership with the inspector of taxes,
2. drawing up a partnership agreement and an on farm agreement,
3. adding the new entrants name to the herd number,
4. opening up a partnership bank account,
5. Registering the partnership on the DAFM register.

If you do proceed with a partnership there is a grant available to assist with the cost of professional fees incurred in setting up the farming partnership. The grant, which is paid at the rate of 50% on a maximum spend of €5,000. The maximum potential payment is €2,500.

While the benefits outlined above are many, a farm partnership is not something to be rushed into. Time should be taken to get good legal and tax advice to ensure that your circumstances are suited to a partnership which is, after all, a binding legal agreement.

If you require further information on this please contact Michelle Kehoe at 053 9170507 or email michelle@rda.ie