Budget 2016: €25,000 tax credit available for family farm partnerships
A new tax credit worth up to €25,000 is to be introduced by the Government to incentivise the establishment of family farm partnerships.
Introducing the proposal, the Minister for Finance Michael Noonan said it will provide increased certainty about the timing of the transfer of a family farm to the next generation of farmers and will greatly assist with long-term planning and farm productivity.
The proposal, which is subject to state aid approval, will allow two people, for example family members, to enter into a partnership with an appropriate profit-sharing agreement which makes provision for the transfer of the farm to the younger farmer at the end of a specified period, not exceeding ten years.
To support this transfer, an income tax credit worth up to €5,000 per annum for five years will be allocated to the partnership and split according to the profit-sharing agreement.
The examination of this measure to incentivise earlier intergenerational transfers of farms was included in the agri-taxation review recommendations of family farms.
The Family Farm Partnership is a structure in which family members enter into a partnership, and appropriate profit-sharing agreement, with the provision for the transfer of the family farm to the younger farmer at the end of a specified period (not exceeding 10 years).
The partnership model enables a gradual transfer of control and also facilitates knowledge transfer from one generation to another.
The measure is expected to cost the state €10m per annum.
Speaking following the Budget announcement the Minister for Agriculture Simon Coveney said a lot of work has been done on partnerships and there are currently about 1,500 across farms in Ireland.
“However, transferring the farm from one generation to another is not an easy process. This new partnership setup should encourage people in their early to mid-thirties to enter partnerships. This should be a real welcome development among farmers.
“The only criteria for these partnerships is the age limit – the young person must be under 40. So, if they are 37 when they enter the partnership they will only get three years of tax credits.
“The transfer period must take place within 10 years, and by the end of the 10 years 80% of the farm must be transferred to the young person, he said.
The Minister also confirmed that favourite niece of nephew is covered by the partnership scheme.