20% ‘clawback’ on entitlements explained
There is plenty of demand to buy entitlements this season. However, there is not an appetite to sell. This is mainly due to the 20% ‘clawback’.
In 2018, the sale of entitlements without land is subject to a clawback of 20%. This clawback has been reduced from a previous figure of 50% and is to facilitate the National Reserve. To be considered as a sale of entitlements with land, 1ha of land must be sold per entitlement.
How the clawback works
Seán Doyle, of Doyle Auctioneers, explained: “The farmer that buys will always get the figure they’re looking for. If a farmer wants to sell 10, they will only get paid for eight and be selling eight to the farmer that wants to buy.
If a farmer rings me and they want eight, they will get eight. Nothing comes off the buyer.
“It automatically comes off the seller. When carrying out the transaction on the website, the Department of Agriculture will take off the 20% and the buyer will get eight and pay for eight,” he added.
As a result of the clawback, the majority of the entitlements trade is in leasing. Where entitlements are being sold, they are moving for up to three times their value in some cases.