Is formal partnership needed for successful farm transfer?

Details on how farm partnerships play an integral role in farm succession were recently outlined by Teagasc Collaborative Farming Specialist, Thomas Curran.

Speaking at the organisation’s National Milk Quality Farm Walk hosted by the Power family, in Co. Waterford, he said: “There’s always a lot of confusion about what succession actually is.

“A lot of people confuse succession with the transfer of the farm, when that’s not the case at all.

“Land transfer is about whether you get the farm through a lifetime gift or through inheritance. Succession is everything that happens before that.”

Curran said farmers need to be conscious that succession is happening on the farm every day at some level, with research carried out by Teagasc showing that succession is an “ongoing process” that can begin early in the life of a son or daughter.

If your family is starting to get involved on the farm with you, doing routine tasks – going out to bring the cows in – that’s all part of succession. That’s where the interest in farming develops from.

Two generations working together

Farm partnerships are essentially a business model that facilitates two generations to work the farm together, Curran explained.

He said: “You work the farm as one unit with your successor – your son or daughter – and you share the profits from the farm.”

Curran also highlighted how farm partnerships involved shared management and decision-making.

He added: “Its hugely important for the development of a young person, as a farmer, to be given responsibility; to be listened to; to have their opinions heard; and to be involved in the critical decision-making on the farm.

“Young people who have completed a farm management course or a degree in agricultural science need the opportunity to use what they have learned.

“Same goes if the young person has gone to New Zealand, or elsewhere, to gain experience on other farms. It’s very important the young person gets the opportunity to use the skills they have learned.”

Role-reversal

Teagasc has found that a young person who entered a family farm partnership under the Milk Production Partnership Scheme, which began back in 2002, is now the main operator of the family farm.

Curran said: “There was a transition and a role-reversal.

“The parents came in with all the assets and experience at the start, and the son or daughter came in with their training and education, and their experience from outside the farm.

“Over time the roles reversed, leading on to, in a lot of cases, farm transfer.”

And, according to Teagasc, farm partnerships are an excellent transition business arrangement to facilitate the succession process involving two generations.

Succession farm partnerships

Minister for Agriculture, Food and the Marine, Michael Creed, recently introduced succession farm partnerships – a new income tax incentive available from 2017 onward – where farmers enter a registered farm partnership with their successors.

“It’s essentially an add-on to the existing registered partnerships. The carrot for the farmer is a tax credit of €5,000 per year for five years; €25,000 of a tax credit,” Curran said.

The key requirement for the partnership is the agreement to transfer the farm within three to ten years.

“So, if farm transfer is a reality in the next three to ten years, you can avail of that credit. For people in existing farm partnerships, you can change onto that system by completing a succession agreement,” Curran concluded.

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