Farm Ireland
Independent.ie

Monday 20 November 2017

Partnerships offer best hope of getting land to those who are searching for a hands-on role

Aisling Meehan

There is a widely held view that the land rental market has been stagnated by the on-going CAP reforms. Macra studies have confirmed that the uncertainty over CAP is affecting succession decisions.

The simple fact is that not all landowners want to farm their land. At the same time, however, they are reluctant to sell or let the land for fear of losing out on establishing entitlements for EU farm payments.

This fear was heightened when the EU Commission signalled its intent to direct future payments to active farmers. The Commission is proposing that payments should not be granted to applicants who show no real agricultural activity on their land by axing payments where they are less than 5pc of total receipts from all non-agricultural activities.

Brussels bureaucrats will spend the second half of 2013 turning any CAP agreement into regulations which will set the framework for the rules that will apply in each EU member state.

Each state will then be given 12 months to put new systems in place so that the new CAP can begin in 2015. In the meantime, the old system will continue as is.

So landowners holding on to land in speculation on how best to maximise payments under the new system are now facing two problems.

The first is that they will have to wait another 18 months before they will know exactly how the new system will work.

In addition, the 'active farmer' requirement means that they will need to be seen to be farming the land themselves in order to draw down payments under the new system.

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One of the best hopes we have of getting land into the hands of those who want to actively farm it is through partnerships.

The problem is that the rules and incentives are currently limited to dairy partnerships only. This is about to change but the progress, similar to CAP negotiations, can be painfully slow.

In the last Budget, Minister Noonan signalled that the various benefits granted to Milk Production Partnerships were being extended to partnerships in other farm enterprises such as beef and sheep farmers in partnership.

Regulations for these new farm partnerships are being drafted up and should be ready towards the end of this summer.

Only when all of this is finalised, will other partnerships be able to avail of the tax benefits and Dept of Agriculture schemes. This, in turn, will bring with it a certain amount of paperwork. Official partnerships need to register with the Revenue, the Department and the partnership registration office (currently based in Moorepark, Co Cork).

Part of the obligations that this will bring include a return of income and gains and personal returns for each partner and a completed partnership agreement.

The payback will be an extension of the valuable tax relief measures that are limited to dairy partnerships to other sectors.

Take an example where a husband and wife are co-owners of land and the husband wishes to go into partnership with a neighbour while his wife does not want to become a partner.

This can affect the wife's entitlement to Capital Gains Tax retirement relief since she may end up not owning or farming land for the minimum 10 years prior to a transfer.

However, in a milk production partnership the wife can be granted an exemption from the requirement to become a partner and still be entitled to avail of the Capital Gains Tax retirement relief.

Aisling Meehan, Agricultural Solicitors does not accept responsibility for errors or omissions howsoever arising. E-mail aisling@agriculturalsolicitors.ie.

Irish Independent



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