Transferring farm means planning properly is vital
The succession advice comes from an article in the current issue of the Teagasc/Agricultural Trust Today’s Farm publication, by Kevin Connolly of the Teagasc Farm Management & Rural Development Knowledge Transfer section.
This involves not only the scale and income generating capacity of the farm but also the income demands on the farm business from all parties, who might include:
* The eventual successor who has taken over the running of the farm.
* The previous generation (usually father and mother) (see earlier points.
* Other family members who have a legitimate expectation of income from the farm business.
For the installed successor of the farm, it is important that their work input, investment in the farm and expectations with regard to income are balanced, so that they see the farm business as a realistic prospect rather than a ‘‘noose around their neck’’.
It’s important that the viability of the farm is not undermined by having to sell parts after the transfer.
To avoid these forced sale scenarios, it is important that a balanced and family-agreed farm transfer is achieved which looks at both the viability of the farm as well as aiming to minimise the tax liability.
Planning transfer of the main farm business assets involves carefully assessing the potential tax implications.
A professional tax adviser or accountant should be retained to advise on what is being considered, before any transfer takes place. This is important, as many of the taxes reference the date of the legal deed of transfer, so planning after the event is not usually an option.
The main taxes that apply for a lifetime transfer of a farm are Capital Acquisitions Tax (CAT), Capital Gains Tax (CGT), and Stamp Duty (SD).
These taxes can be fairly punishing, in that the rates of both CAT and CGT taxes have increased dramatically over the last few years. With proper organisation and planning, it is possible that the tax burden can be reduced considerably or even avoided altogether. There are some useful tax reliefs and measures available to reduce or eliminate any tax, but only if certain conditions are satisfied both before and after the transfer.
Generally, where a company is involved, the land is held in the name of the farmer, and is leased to his/her company for the purposes of farming. So, any handover of the business may now involve the handover of two major assets — the land and the shares in the farming company.
Some of the normal reliefs that apply on the transfers of individually-owned farm businesses also apply to companies, but there are differences and some special conditions, particularly around the operation of some of the reliefs. Seek advice from your accountant early on.
Your Teagasc adviser has a lot of useful knowledge on succession planning and can discuss the various issues with you, particularly around farm management structures and the administration of EU entitlement transfers. The adviser can also help you identify the areas you need to discuss with your solicitor or ac- countant. Involve your solicitor and accountant early in the process to ensure that you get the legal and tax angles identified, and a roadmap put in place to as to how to best execute the transfer.
Teagasc is holding a country-wide series of clinics on the various issues involved in transferring the family farm, in September and October.
Teams of local Teagasc advisers, solicitors, accountants and others will be available to answer your individual queries around your own farm transfer. Check your local press for details or check online in events section of the www.teagasc.ie website.
Clinics will take place at 10.30am and 2pm. Pre-booking is essential. Teagasc invites all farm families to participate.
Upcoming clinics are at the Park Hotel, Dungarvan, in Co Waterford on Tuesday, September 30; Mallow GAA Grounds, Co Cork, on Wednesday, October 1; Parkway Hotel, Dunmanway, Co Cork, on Friday, October 3; and Hotel Minella, Clonmel, Co Tipperary, on Monday, October 6.
