Incorporating farms -- what does it mean for the local co-ops?
Making your farm into a business can save thousands of euro a year, thanks to 12.5pc corporation tax which lowers your liability
Published 06/09/2011 | 05:00
Farms that have decided to incorporate to minimise their future tax bills will have an unclear standing with their co-ops until a new policy is formulated by ICOS.
There has been huge interest among larger farmers in converting their farms into companies in order to benefit from the 12.5pc corporation tax.
However, the switch also has serious implications for the membership status of the farmers with their local co-ops.
"The rule structure of co-ops is not designed to be able to handle corporate members," said ICOS secretary Seamus O'Donoghue. "There would have been very few, if any, corporations that wanted to be members of co-ops heretofore."
However, this has all changed with the deregulation of milk quotas in 2008, coupled with the current upturn in farming fortunes.
According to IFAC's Declan McEvoy, incorporation and its implications is the hottest topic he's had to deal with so far this year.
The main reason for the interest among farmers is to minimise their tax liability, with accountants estimating that a farmer with a taxable income of €80,000 a year could save more than €12,000 a year in taxes if they switched from sole trader status to becoming a company.
However, by making the switch, a farmer would become a non-trading member of a co-op, which would have serious implications for both the farmer's voting rights and the co-op's exposure to liability.