Boom time for farm partnerships
Budget 2016 has further enhanced the attractiveness of farm partnerships.
From 2016, farmers who enter into a registered partnership with their intended successor will attract a new €5,000 tax credit that will be shared between the partners. This measure along with the new Earned Income Tax Credit could save a typical father/son partnership up to €6,100 in tax in any one year.
These two new measures, along with the retention of the existing Stock Relief provisions will mean that many newly formed partnerships will pay little or no income tax.
In addition, the reduced rates and extended entry threshold to USC may also provide a significant saving for many farmers. Persons earning less than €13,000 will now be exempt from USC and for those who will be liable, the rates are reduced by between 0.5pc and 1.5pc.
The new partnership tax credit will be available for a five year period and will be conditional on the farm being transferred within 10 years.
While most transfers will not attract Capital Acquisitions Tax, the increased threshold of €280,000 from parent to child as announced in the Budget will further lessen the possibility of CAT for larger farm transfers.
Apart from the generous tax concessions, farm partnerships also attract a doubling of the €80,000 investment limit under the TAMS schemes which can be worth up to €48,000 to a young trained farmer.
Taking all of the available incentives into account, farm partnerships are now a really attractive option for farm families. The case study (see panel) outlines a scenario where the maximum available benefits can be exploited by forming a new partnership in 2016.