Farmers who are considering joining a registered farm partnership are being reminded of the fast-approaching deadline for 2022.
While registered farm partnership applications can be accepted and processed at any time of year, there is a looming deadline for 2022.
Farmers who want a registered farm partnership number in time to apply for the Basic Payment Scheme (BPS) in May must have submitted an application before February 11, 2022.
On a recent episode of Teagasc’s ‘The Beef Edge‘ podcast, presenter Catherine Egan spoke with Teagasc’s Collaborative Farming Specialist Gordon Peppard on the opportunities a registered farm partnership can present.
What is a Registered Farm Partnership?
Speaking on the podcast, Peppard explained: “A registered farm partnership is a formal business structure that’s recognised by the Department of Agriculture, Food and the Marine (DAFM).”
A registered farm partnership must have a minimum of two partners, up to a maximum of 10 partners and there are two different types of partnerships.
The first type of farm partnership is an intra-family partnership, where a parent goes into partnership with their child or children.
The second type is an inter-family registered farm partnership. This is where neighboring farms want to join together to increase scale or efficiency.
How to register
To register, the farm partnership first needs a Category 1 applicant.
A Category 1 applicant is a farmer who has farmed in their own right on a minimum of 3ha for at least the previous two years.
Peppard noted that in a family partnership, the father or mother generally would have farmed in their own right for a number of years and would qualify as a Category 1 applicant.
The second person in the partnership, can be either Category 1 or Category 2.
A Category 2 applicant has to have a minimum of a Level 6 agricultural qualification and a minimum of a 20% profit share in the registered farm partnership.
What are the benefits?
According to Teagasc’s Collaborative Farming Specialist, the benefits can be broken down into two main areas: The social benefits and the financial benefits.
In a family situation, a registered farm partnership “is a natural progression of the farm business and starts the process of the transfer from one generation to the next,” Peppard explained on the podcast.
“It brings a young person(s) into the farm business where everybody is recognised from a management and physical point of view and you now have two or three people involved in the business and you can have a shared workload – which helps the work-life balance.”
Peppard continued: “Young people in the business often bring new skills, energy and enthusiasm to drive the business forward.”
Tax
One significant benefit of a registered farm partnership is maximising the lower-rate of income tax, he added.
“Depending on the number of partners and the profit-sharing ratio agreed, you can maximise the amount of income coming into the farm. This can be done with your accountant,” he said.
Farm schemes
The agreement also has benefits when a farm is applying for schemes. As part of the Targeted Agriculture Modernisation Scheme (TAMS), an individual is allowed a ceiling on grant aid of up to €80,000.
In a registered farm partnership, it can double that to a €160,000 investment becoming eligible for grant aid.
A young, trained farmer can get a 60% grant on the first €80,000 investment in TAMS and older trained farmers can get 40% grant aid on an additional €80,000 of eligible infrastructural investment.
As well as this, Peppard noted the Young Farmer Scheme (YFS) top-up valued at roughly €67-8/entitlement on the first 50 entitlements. However, he added for farmers to bear in mind the ongoing Common Agricultural Policy (CAP) transition period and said: “Things may change as we go forward.”
A young, trained farmer is entitled to stock relief of 100% for four years, and the other members in the farm partnership can avail of a 50% stock relief.
As well as the above, a collaborative farming grant is also available to encourage people to get the best financial and legal agricultural advice, and there is a grant of 50% on a maximum spend of €5,000 for joining the farm partnership.
How to sign up
An application form needs to be filled out, which includes details on names, addresses, the herd number and the profit-sharing ratio.
However, Peppard noted: “A few more substantial agreements must also be completed.”
Firstly, a farm partnership agreement must be completed in conjunction with an accountant. The accountant will need to register the business with Revenue to obtain a tax reference number.
The entrants will also need to create a capital account and this outlines what every partner is bringing to the business on day one. This will also help agree on a suitable profit-sharing ratio to maximise tax benefits.
Peppard continued: “This is probably also a good time to talk about future farm succession and taxation coming down the line in terms of a land transfer.”
One of the other agreements required is an on-farm agreement. That is a round-the-table form that needs to be filled up with all members of the partnership to outline different areas of responsibility, hours to be worked, time off, how much is to be paid etc.
The other thing needed is the bank account. Every registered farm partnership must have a designated bank account that has the names of all partners on it and all transactions on the farm must go in and out of that bank account.
Depending on partnership type, there may be herd changes needed. Farmers may need to talk to their regional vet office to add names to the existing herd number.
Farmers hoping to apply should discuss how a partnership will work and talk to farmers already in a partnership to better understand any challenges they faced.