As BPS applications close, consider the Succession Farm Partnership scheme for 2023

The Department of Agriculture temporarily suspends such applications each year from early February until the Basic Payment Scheme application deadline.
As BPS applications close, consider the Succession Farm Partnership scheme for 2023

Silage-making in Ballycastle, Co Antrim. Picture: Steve Allen / iStock

Now that the Basic Payment Scheme deadline has passed, it is once again possible for farmers to consider registering a Registered Farm Partnership or a Succession Farm Partnership.

The Department of Agriculture temporarily suspends such applications each year from early February until the Basic Payment Scheme application deadline which for this year fell on May 16, in order to ensure that applications made prior to that deadline are processed on time.

Some applicants prefer to delay their application to set up for either type of partnership until December in order to avoid disruption to payments under the Basic Payment Scheme which occur typically in October and December each year.

Applying in the window of mid-December to early February does give the optimal chance of avoiding delays to payments but waiting for that window may be impractical for a number of reasons.

Applying midways through 2022 can make a lot of sense where the applicant wishes to avail of the Succession Tax credit for the year 2022, whereas delaying applying until late December an applicant is unlikely to receive approval before the year end, thereby losing out on that valuable tax credit for this year.

As an incentive, applicants who sign up to a partnership agreement layered up with a succession plan, a ‘Succession Farm Partnership’, can avail of a tax credit worth up to €5,000 per annum for a five year period shared out amongst the partners in accordance with the profit-sharing ratio defined under the partnership agreement.

The credit is only payable where the proposed successor is under 40 years of age on January 1 of the relevant year.

If a proposed successor is over 35 years of age presently and under 40 years of age, then signing up for a Succession Farm Partnership sooner rather than later will maximise the potential income tax savings achievable.

A further condition of the Succession Farm Partnership scheme is that the partnership must continue for a minimum period of three years before the farm holding can be transferred to the successor.

Where a proposed successor is coming up to the age of 32 signing up to a succession farm partnership agreement sooner rather that later can mean that the partners can avail both of the potential income tax savings but more importantly the successor is also leaving the window open for themselves to claim Young Trained Farmer Stamp Duty Relief where relevant criteria are satisfied.

Applying sooner rather than later can also confer the benefit of young trained farmer top-ups to the Basic Payment Scheme entitlements which run out once the successor has completed five years of farming or reaches the age of 40, which ever occurs sooner.

Similarly, the 60% TAMS grants available to young trained farmers also expire once the farmer reaches 40 or has completed five years farming — whichever occurs sooner.

Separately, it’s not yet clear whether a wiping of the slate in respect of TAMS grants will come into effect in 2023 when the new CAP programme comes into effect.

Jumping into a Registered Farm Partnership earlier on in 2022 might, therefore, make a lot of sense where a young trained farmer intends on claiming TAMS grants under the current programme, and is likely to incur expenditure in the medium term which will exceed the current TAMS grants thresholds.

By jumping in early the partners would put themselves into a better position of being able to claim TAMS grants under the current programme and any new programme.

The decision to go into a formally registered partnership, or indeed even an informal unregistered partnership, is a big decision and a sufficiently long lead-in time should be afforded such that a proper understanding of the legal, tax and financial implications are fully explored, understood by all parties and accepted.

Individuals should obtain professional advice relevant to their own specific circumstances.

More in this section

Farming
Newsletter

Keep up-to-date with all the latest developments in Farming with our weekly newsletter

Sign up
Revoiced
Newsletter

Some of the best bits from irishexaminer.com direct to your inbox every Monday.

Sign up
Lunchtime
News Wrap

A lunchtime summary of content highlights on the Irish Examiner website. Delivered at 1pm each day.

Sign up