Free quota chance for dairy entrants

Aisling Meehan

The detailed rules for the allocation of milk quota to new entrants for this year have recently been published. The milk quota under the scheme is allocated from the national reserve and originates from the 1pc annual increase in EU member states' milk quotas agreed under the CAP health check from 2009 to 2013.

Minister Coveney has allocated one quarter (0.25pc) of the 1pc annual rise from this year's increase in milk quota to this year's New Entrants Scheme.

In last year's scheme, of the 218 eligible applications received, 84 new entrants to dairying were allocated milk quota. Of this total, 53 entrants, who had not previously held quota each received allocations of 200,000 litres.

The remaining 31 successful applicants who had previously purchased quota as either new entrants or successors under the Milk Quota Trading Scheme (MQTS) received allocations averaging nearly 140,000 litres.

Entrant

The scheme provides for three new entrant categories:

• Category A: New entrant to dairying. An applicant under this category must never have had a milk quota, nor have been a producer previously either in his own name or jointly.

• Category B: Purchaser of quota as a new entrant under the MQTS. However, an applicant under this category must not have received more than 200,000 litres of quota under the MQTS.

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• Category C: Purchaser of quota as a successor through the MQTS. Again an applicant under this category must not have received more than 200,000 litres of quota under the MQTS.

The rules provide that a maximum of 50 successful applicants under category A will each be allocated a milk quota of 200,000 litres.

The remaining quota will be allocated between category B and category C applicants, but the individual allocations will be capped so that the applicant's total permanent quota, in addition to any quota allocated under this scheme, will not exceed 200,000 litres.

However, the rules also provide that successful applicants under this scheme are eligible to apply to purchase additional milk quota under the MQTS which provides them with an opportunity to top up their quota to 350,000 litres.

The rules provide that applicants who receive quota under category A may not:

• Merge with another enterprise in any form for a period of three years or until the end of the milk quota regime. This means that a successful applicant under category A may not enter into a milk production partnership with a parent or anybody else until the end of the milk quota regime.

• Benefit from the transfer of quota for a period of three years or until the end of the milk quota regime, except through inheritance following the death of the transferor.

For example if a parent dies, the parent's quota can be transferred to the son or daughter without triggering a clawback of the prior allocation under category A of the New Entrants Scheme.

• Transfer the quota except to a successor in the event of the death of the producer provided the successor remains in milk production. For example, if a son or daughter dies who had qualified for an allocation under category A from the new entrants scheme, the quota can be transferred to the parent, provided the parent remains in milk production.

Successful applicants under category A and category C must commence production by April 1, 2014. Category B applicants must begin production within 15 months of receiving their trading scheme allocation.

To be eligible for the scheme, each applicant must satisfy the following criteria:

• Satisfy the education and training requirements such as a green cert or its equivalent;

• Have a holding comprised of owned or leased land;

• Have their own separate herd number in which the dairy animals will be registered;

• Have their own separate milking and milk storage facilities situated on their holding prior to commencement of milk production;

• Submit a five-year business plan.

Criteria

It is worth noting that satisfying the eligibility criteria does not mean that an applicant will automatically qualify for 'free quota'.

A rigorous assessment of the applications will be carried out by an independent panel, which last year was chaired by John Tyrrell, former director of ICOS.

The purpose of this assessment is to establish the extent to which each applicant can demonstrate a real and long-term commitment to dairying.

Successful applicants will be required to submit a financial statement to the Department of Agriculture at the end of each year. They will also be required to attend training, facilitated by Teagasc, which will take place over a two-day period initially and will be followed by three one-day sessions thereafter.

The detailed rules are available on the Department of Agriculture website. The closing date for receipt of applications is Friday, May 4. Applications and sample business plans can be requested from Avril Claffey on 01 6072329.

Disclaimer: Solicitor and tax consultant Aisling Meehan does not accept responsibility for errors or omissions. www.agriculturalsolicitors.ie

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