Farm Ireland

Wednesday 21 February 2018

Going down company road offers fresh option for retiring dairy men

Aisling Meehan and Oliver Ryan-Purcell

Many dairy farmers nearing retirement age are facing a dilemma. Though none of the children are interested in farming, the farmer can't afford to do without some kind of a farming income just yet and, to top it all, many are worried that the farm will be unable to compete in terms of scale by 2015 without significant investment.

There are options, but often with catches for the farmers involved. Examples include:

• Go into partnership? But I do not have a suitable partner at present.

• Plant forestry? But I am not interested.

• Sell? Never.

• Sell quota and go into sucklers? But the farm has been used for dairying for generations.

• Transfer or lease to a family member? But nobody is interested at present.

However, new clarifications regarding milk quota regulations have brought a series of other options to the fore. It has now been confirmed that a dairy farmer can lease his land and milk quota to a company in which milk producers hold a majority shareholding.

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Accordingly, there is nothing to prevent a number of ordinary-sized dairy farmers getting together and forming a company and then leasing their dairy land and quota to that company and organising between them how to run it. All of the lands used for milk production must be leased in these circumstances. While Milk Production Partnerships require a minimum period of five years' commitment, one year is the minimum period for leasing of land and quota to a company.

If a dairy farmer does not want to be a shareholder in the company, he or she can simply lease his or her dairy land and quota to the company and merely collect the rent.

Crucially, ownership of the land is retained. There is huge scope for all kinds of different arrangements relating to how the farm is managed and how the finances are sorted out. It is an alternative mechanism, whereby an overburdened dairy farmer working on their own can move forward with less physical pressure and more comfort and still see his or her family farm well maintained.

Furthermore, it is a mechanism whereby ordinary-sized dairy farmers can move towards the future with greater confidence.

Unfortunately, the mere mention of a company can be enough to turn farmers off the idea due to the various tax and financial implications that a company involves.

There are also implications for various farm schemes, including the Single Farm Payment and veterinary and other considerations. The mechanism is not simple by any means. It is not a standard form that can be easily filled and signed, but something that needs extremely careful consideration.

However, there are also advantages in having a company structure. Whatever the problems, they will be shared among the people forming the company. There will obviously be economy of scale but, most importantly, leasing to such a company or being involved in it to a greater or lesser degree is a possible way out of the dilemma of an uncertain future that faces many farmers.

Disclaimer: While every care is taken to ensure accuracy of information contained in this article, solicitor and tax consultant Aisling Meehan does not accept responsibility for errors or omissions howsoever arising. Tel: 061 368412

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