Plan farm transfers early to avoid ‘large’ tax bills
Farm transfer is succession and inheritance combined, as James McDonnell, Farm Management Specialist at Teagasc Oakpark, defined in a recent Teagasc webinar on farm succession.
He said that succession is the gradual transfer of management from one generation to the next, while inheritance, he explained, is the legal transfer of ownership from one generation to the next.
McDonnell explained that succession might occur for several years before inheritance comes into play.
During the virtual session, he told attendees about various financial farm succession supports are available.
- Young Farmer Scheme (€68 in 2022; Circa €160-€190 in CSP);
- National Reserve (Average value entitlement: €180) If you secure this and a ‘greening’ payment, it will bring you up to €250 plus €68, which is €318/ha;
- TAMS: 60% for young, trained farmers VS 40% for others;
- Registered farm partnership grant, which covers up to 50% of the costs that occur.
- Stamp duty relief for young, trained farmers;
- Agricultural relief – CAT;
- Stock relief – Income tax
- Succession farm partnership income tax credit.
Who can help?
He advises farmers to reach out to various personnel and bodies to access when engaging in this process.
Farmers can talk to their local agricultural advisor, education officers regarding courses and forestry advisors if you are considering this enterprise as an option.
However, farmers can also engage with an accountant as you must file capital tax returns (CAT, CGT, and SD).
Furthermore, for legal-related issues, you should seek a solicitor’s expertise, particularly concerning wills, conferring benefits and legal security to have as part of the transfer (for example, retaining the right of residence in the farmhouse).
The Department of Social Protection-funded Citizens’ Information can also provide information in relation to the Fair Deal Scheme, pensions, and entitlements the state can provide to you, while the department itself handles queries relating to work history and PRSI payments for example.
In some cases, you may need to enlist the help of a mediator, while an auctioneer can provide valuations of properties to enable you to submit CAT returns.
Farm transfer: Where to start?
The state agency urges the farm owner to make a will, as if this is not in place, the intestacy laws come into play as per the 1965 Succession Act.
He explained: “If you die and do not have a will made, the state decides how your assets are distributed. So, if you want to make that decision yourself, you do it through a will.”
“They are cheap enough to make. It is a case of making an appointment with a solicitor and writing a will. Your will is ultimately a back-stop.”
Concluding, McDonnell acknowledged that a succession plan requires “a lot” of time but “it is always better to go early than too late”.
“Because when you are too late, you might end up with a large tax bill,” he concluded.
When closing his presentation, he quoted William Shakespeare: “Better three hours too soon than a minute too late”.