Report: ‘Clear divide’ between beef and dairy farmers in understanding tax

Research has suggested that there is a “clear divide” between beef and dairy farmers in their understanding of land transfer taxation.

The research was published in the study ‘Risky (farm) business: Perceptions of economic risk in farm succession and inheritance’ carried out by Teagasc and the National University of Ireland Galway (NUIG).

It shows that, despite recent research indicating that land transfer taxation would be of little consequence to an average farmer where their successor meets tax relief criteria, one of the most prominent concerns that beef farmers have relating to farm succession and inheritance is taxation.

In what the report describes as a “stark contrast”, a majority of the dairy farmers interviewed saw taxation as something that could be managed efficiently, whereas concerns were presented mainly by beef farmers in terms of the negative economic effect that a large tax bill would have on a successor.

A beef farmer who took part in the study said:

“I hear a lot of people talk about inheritance tax. There should be an awful lot more done with that; that you could give it [land] more freely; and nobody is crucified. I hear a lot of people say there’s places sold over it.”

Another beef farmer also highlighted his concerns, saying: “If I was to transfer to my sons, the thing that would worry me is what tax implications [there] would be for them. Naturally enough I’d be wondering about my own income.”

‘Built opinions of land taxation on anecdotal evidence’

The report stated that many farmers have built their opinions of land taxation on “anecdotal evidence rather than on the advice of taxation or other farm professionals, leading to a sensationalised perception of possible consequences”.

Dairy farmers in general exhibited a more “comprehensive knowledge of structures and reliefs associated with land transfer tax” and this contributed to a positive approach to farm transfers.

“The value of an average dairy farm is generally higher than that of their beef counterparts, meaning dairy farmers would have higher land transfer taxation bills,” the report stated.

The level of income accrued by dairy farmers tends to be higher. This, in turn, relates to the frequency of which dairy farmers engage with professionals such as accountants, thus, directly linking dairy farmers with a regular source of knowledge.

“The clear divide in understanding on the implications of taxation was evident between the beef and dairy farmers, with the larger and more financially profitable dairy farms [all of whom, including prospective successors, were full-time farmers] evidently having a succession plan in place.

“The beef farmers, on the other hand, who were all part-time farmers were far less aware of the taxation implications and were working on the basis of anecdotal information.”