Friday 30 September 2016

How to take the stress out of land succession

Agricultural advisors have a big role to play in helping farming families negotiate issues around land transfer and farm partnership agreements

Kevin Connolly

Published 26/08/2015 | 02:30

The aim is to get the transfer completed with the minimum of fuss.
The aim is to get the transfer completed with the minimum of fuss.

Dealing with the issue of the transfer of the farm is one that every farm family will eventually have to address. This will often involve decisions around the changeover of the management responsibilities as well as the transfer of farm assets and other assets.

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The whole process can seem an extremely daunting prospect to some people which is why, quite often, the task of looking into the transfer is left until the last minute and is usually prompted by some impending tax-related deadline.

The first key step in kicking off the process of a farm transfer is to sit down as a family and decide what a successful farm transfer will look like when it is completed.

Issues such as who will assume overall management responsibility for the farm after the transfer as well as how will the farm and non-farm assets be apportioned should be discussed by the family members affected.

If agreement is reached in relation to some of the transfer issues, this will assist in getting focused advice from the various professionals later on.

Going to your agricultural advisor for guidance first can be a valuable first step. Most advisors will be familiar with many previous farm transfers and so can provide useful pointers as to what has worked well and what has caused problems in this area.

The advisor has also experience of the income-earning potential of a farm business - this is useful if there is another person coming in to the business with expansion plans and a requirement to earn a living from the farm.

They also have unrivalled knowledge of farm schemes and issues around the transfer of EU entitlements.

Agenda

Meeting the advisor prior to meeting the other professionals will be useful in setting out the agenda on which advice needs to be sought from the tax, legal and other experts.

Tax is an area that is often of most concern as people are always wary of triggering an unexpected tax bill for either themselves or their next of kin as a result of any transfer.

Taxes such as Capital Gains Tax, Capital Acquisitions Tax, Stamp Duty and even Income Tax and VAT could potentially be triggered by a farm transfer.

Matters associated with the years of ownership and use of assets for farming purposes, the value of agricultural assets held by the parties as well as the ages of the parties involved could affect the final tax position. Many of the transfer tax issues can be managed satisfactorily with advance tax planning.

The legal matters involved can either be straightforward or extremely complex.

Solicitors also have a vital role in checking ownership title issues as well as advising on any changes to the farm business ownership structure whether that is as individuals, partners or, as is becoming increasingly common, as company directors.

Factor in possible consultations with an auctioneer as well as the bank manager and you can see that there a lot of angles to cover.

Getting all these consultations completed and putting the transfer plans in motion can be a challenge in even the simplest of farm transfer scenarios.

A useful approach, which has worked well in some cases, is to bring all the individual professionals together to meet the family at a dedicated meeting to discuss the likely implications of the transfer and explore all the possible options.

The ultimate aim is to get the desired transfer completed with the minimum of fuss while ensuring that the potential tax, legal and farm scheme issues are dealt with satisfactorily. The attached case study shows how this might work in practice.

Teagasc are holding a series of clinics this autumn on farm transfer issues. These clinics provide you with an opportunity to get information on farm transfer issues and to consult with solicitors, accountants, advisers, and mediators.

The provisional dates and venues are listed in the panel, but keep an eye on your local paper and the Farming Independent for further details.

Kevin Connolly is a financial management specialist, with the Teagasc Rural Economy & Development Programme email: kevin.connolly@teagasc.ie

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