Registering a Farm Partnership –The Requirements

Teagasc Farm Business Conference2015

Thomas CurranFarm Structures SpecialistTeagaschttp://www.teagasc.ie/collaborativearrangements/

Tullamore Court Hotel26th November 2015

Outline:Collaborative Arrangements

1. Registered Farm Partnership

a) Family

b) Non-Family

2. Dairy Heifer Rearing

3. Long-term Land Leasing

4. Share Farming

5. Cow Leasing

6. Land Restructuring

What is success based on?

• Must Benefit all parties

• Building a strong working relationship is essential

• Mutual Respect

• Trust between partners

• Good Communication

• Willingness to compromise

• A Well Written Agreement

• Previous working relationship – an advantage

• Ability to generate multiple incomes

• Take a broad view – Skill sets, Labour Efficiency, Lifestyle, Resources,Expansion

Considering a Partner

Partner

ResourcesAvailable

Skillset/

interests

Goals/Needs/Values

Benefits toall partners

Compatibility

Risks for thePartner

1. Registered Farm Partnerships

• The Structure

• Forming a Partnership

• “The Steps”

• The Role

• Benefits

Registered Farm Partnership

• It’s a Profit-Sharing Business Arrangement.

• Where at least two or more farmers combine all their farm

enterprises to operate as one farm unit & Share Profits

• Cannot be in two partnerships but can add new partners to the

partnership

• Duration: At least 5 years

• http://www.teagasc.ie/collaborativearrangements/

The Role of Partnership

• Family Partnerships

• A Transition Arrangement before Full Inheritance.

• Parents & a son or daughter

• Non-family Partnerships

• Between two or more farmers

• Between an existing farmer and a young person/farm

Manager

The Structure;Two Key Elements:

• Built In Licence (page 15 of template agreement)

• Legal permission for use of assets by partnership

• Permission is revoked on dissolution of agreement

• Land, Buildings, Entitlements, Shares, Contracts for grain, seedetc.

• Assets covered are listed on page 18 of agreement

• Capital Account

• Value of:

• Livestock,

• Machinery,

• Working Capital (cash in the bank)

• Listed on pages 16 & 17 of agreement

Quick example;Partnership Capital on day 1 ofpartnership

Partner A Partner B

Livestock €100,000 €120,000

Machinery €60,000 €75,000

Working Capital (Current a/c Balance) €15,000 €20,000

Total Capital at start of Partnership €175,000 €215,000

Construction of New building (€100,000)(Each Partner borrows €50,000 and makes it available topartnership)

50,000 50,000

Closing Value at end of year 1 ofpartnership

€225,000 €265,000

Forming a Partnership–“The Steps”There are 3 key Steps:

• Farmer Consults with;

• Accountant

• Solicitor

• Teagasc Advisor

• Consultant

• DAFM

• Complete Template Agreement with Accountant, Solicitor, Consultant

• Farmer Completes On-farm Agreement

• Focus on;

• Work Structure:

• Areas of responsibility/Record Keeping,

• Time off & Holidays

• Setting salaries, drawings

The Role of The Accountant

Forming the Partnership

• Register the Partnership with Revenue – TR1 form

• Apply Cessation/Commencement Rules

• Create Capital Accounts for each Partner

• Advise on start date of partnership

• Advise on Drawings, Salaries etc.

• Liaise with the Solicitor/Consultant

Annual Returns

• Calculate the Profit for the Partnership farm

• Apply the profit sharing ratio as per partnership agreement

• Make separate tax returns for each partner

• Complete a FIRMS 1 return form.

The Role of the Solicitor

Formation

• Review the relevant template agreements

• Tailor the agreement to suit the client circumstances

• Addition or deletion of clauses as required

• Modify the document to include more than two partners.

• Explain the legal structure to the client

• Liaise with the Accountant/consultant

Benefits to Family RFP’s

• A transition arrangement before Inheritance

• Provides reassurance to parents and son/daughter

• Shared management control and decision making

• Son/Daughter gains experience under guiding hand of parents

• Finding a balance between youthful enthusiasm and experience

• Written Agreement - Defined roles/responsibilities for each partner

Benefits to non-family Partnerships

• Better labour efficiency

• Cuts out duplication of work

• Two labour units

• Labour efficiency leads to better lifestyle

• Flexibility, time off/on, holidays weekends

• Reduced Capital investment in some cases

• Makes use of existing infrastructure

Financial Benefits

Taxation

• Access to Stock Relief for young farmers – 100% for 4 years

• Enhanced Stock Relief for other partners - 50%

• Maximising low rate of tax –Sharing profits

• €5,000 Tax Credit for 5 years (Pending)

CAP Scheme Benefits

Young Farmer Scheme & National Reserve• 25% of national average Basic Payment Scheme payment

• (~€60 top-up on up to 50 Activated Entitlements)

• National Reserve top-up/New entitlements

TAMS II• Doubling of investment ceiling (€80,000 vs €160,000)

GLAS/ANC Payments• Two applications where partners have been previously separate farmers.

Collaborative Farming Establishment Grant Scheme• 50% grant on a max spend of €5,000

Case Study 2Gerard Creedon & Patrick O’Flynn Partnership

• Pre-Partnership

• Farming separately

• Gerard looking to expand

• Patrick looking to reduce workload

• Amalgamated two farms into one

• One herd (90 cows in 2015)

• Grazing Platform 68 ha

• Roles/Responsibilities

• Two full-time labour units

• Motivation

• Improved Profit

• Remain active

• Expansion to 240 cows

• Two Incomes

• Improved Lifestyle

Case Study 4Frank, Kitty & Ivor Tanner Partnership

• Within Family• Parents/son

• Pre-Partnership• Frank & Kitty farming

• Ivor completing education

• Succession• Ivor on herd number, bank account

• Profit sharing

• Defined Roles/Responsibilities

• Decision making/farm planning

• Motivation/Succession• Expansion of dairy enterprise to provide two incomes

• Gradual transfer of management of the farm

• Joint decision making

• Planning farm business together

Thank you for your attention

Questions?