Understanding share farming
THE EU's renewed focus on targeting payments at active farmers and insistence on persisting with reference years to benchmark payment levels has spurred renewed interest in shared farming.
On one hand, some land-owners that have been letting or leasing out land feel the need to be more actively involved in the farming operations to safeguard their entitlement to a single farm payment. On the other hand, farmers who have relied on taking on extra land through rents or leases are looking for ways to spread some of the risk, while at the same time offering land-owners competitive rates.
Share farming is where two parties -- the landowner and share farmer -- carry on separate farming businesses on the same area of land. It operates on the principle that the share farmer and owner, although farming the same land as individual businesses, have separate incomes and separate expenses to calculate their individual profits. A share farming agreement blueprint was launched by Teagasc in 2009, which draws inspiration from the similar models established in Australia, US, and the UK.
It marries elements unique to Irish agriculture -- including Government support schemes and the tax system.
The details of the arrangement should be set out in a written contract. Share farming can be fully compliant with EU and Government support schemes, including Single Farm Payments and REPS.
The Revenue commissioners are satisfied that landowners participating in legitimate share farming agreements continue to be classified as 'farmers' for the purposes of tax relief (see the table, right).
Share farming is a contractual arrangement between two independent businesses. Care has to be exercised by the parties to the share farming agreement to ensure that the arrangement cannot be construed as some other legal structure, such as a partnership, a letting or leasing of land or an employer/employee relationship. For example, there should be no fixed payment for the land otherwise the structure may be construed as a letting.
Whatever arrangement is entered into, it is essential that it records what is to happen in practice and that the parties stick to those arrangements.