It was agreed that John would join David and his father Tom in an MPP for a further five-year period. John would sell his older cows at the mart and contribute the rest of the cows to the partnership.
David would milk all the cows on his family's farm and supply all the milk to the local co-op. John would be responsible for rearing replacement stock which he would do on his farm as well as being responsible for the paperwork for the MPP. Tom would continue in his role of rearing the calves up to four weeks and relief milking the odd weekend.
One of the conditions of registration of an MPP is that the partners must agree to pool all agricultural lands, assets, entitlements and quota at their disposal at the time of the partnership agreement subject to some limited exceptions. In return, the partners must share the profits of the farming partnership. John, David and Tom decided to speak to an agricultural adviser/consultant about preparing an income projection for the proposed partnership. It was on the basis of this income projection and the value of the assets to be contributed to the partnership that the profit-sharing ratio was devised, with 40pc for John, 30pc for David and 30pc for Tom.
A bank account was opened in the name of the partnership and any income in relation to the partnership is paid into this account in accordance with the partnership agreement.
This is a broad outline of how an MPP could work in a given set of circumstances. However, it equally could work in the context of a whole range of other circumstances. The MPP system was completely overhauled in 2008 to make it more simplified and flexible. The changes introduced included:
•Off-farm income limits removed for all participants other than new entrants farming in partnership with parents. In the case of the latter, the limit has increased from €30,000 to €40,000.
•Upper age limit of 61 was abolished.
•20km distance between holdings has been abolished.
•Quota ratio limit of 4:1 is no more.
•Previous limit on number of participants abolished.
•More than one new entrant per MPP permitted.
•Now open to non-dairy farmers.
The Food Harvest 2020 Report recommends that any remaining obstacles to partnership formation or other new models of farming should be removed, which gives an indication as to the positive light in which these are viewed.
The principal underlying the success of the MPP model is a relationship of trust between the partners and no amount of legal drafting can save a partnership if this relationship of trust breaks down.
In addition, if a partnership is one by name only and operates in practice as a leasing arrangement, a finding of such by the Revenue Commissioners or the Department of Agriculture could give rise to the withdrawal of benefits available to active farmers.
So if you are approached to enter an MPP with so much per acre for the land and so much per litre of milk quota, you would be advised to think long and hard before you sign up.
If you are interested in finding out more about MPPs, detailed rules are available from Teagasc's dairy partnership registration office at email@example.com.
The information in this article is intended as a general guide only. While every care is taken to ensure accuracy of information contained in this article, solicitor and tax consultant Aisling Meehan does not accept responsibility for errors or omissions howsoever arising. Contact her at 061 368412