Ben Fogarty, ifac Kilkenny
The professional services firm for the farming, food and agribusiness sector, ifac (www.ifac.ie), is advising Kilkenny farm families to start succession planning – not only to protect the future wellbeing of their families but also to deliver financial benefits for their successor, prevent family disputes, and avoid unexpected tax bills.
Ifac’s tax team is among the professionals providing advice and support to farm families attending Teagasc’s ‘Transferring the Family Farm’ clinics around the country, this week and last, to help educate farmers about succession planning.
86% of more than 2,100 farmers who participated in ifac’s 2019 Farm Report - one of the most comprehensive farm surveys ever undertaken in Ireland - do not have a formal succession plan in place that documents their wishes and those of their family members.
Ben Fogarty, Manager at ifac’s office in Kilkenny said:
“Viable or not – every family farm business should have a succession plan. Succession planning is crucial for setting up the farm business for the next generation and to help secure the future of Irish farming and rural Ireland. Only a small proportion of farm businesses have clear succession plans in place and this inaction will undoubtedly lead to more difficult decisions and heartache down the road, as well as unnecessary and expensive legal and tax issues for successors. However, the good news is that it can be resolved through the right succession planning.”
To help inform farm families about what’s involved, ifac says farmers should consider the following:
The very first step is to sit down and identify who, if anyone, is interested in taking over the farm and plan from there. Also, asking your accountant or agri-advisor to chair a family meeting can be a good way to clarify expectations.
You will need to get a properly drawn-up will.
What financial provision do you need to make for yourself and other family members? You must look after your own security and that of your spouse before you divest your assets.
Careful thought needs to be given to what will happen to the farm dwelling house, as how this is treated could affect your eligibility for Agricultural Relief.
You need to consider the potential Capital Gains Tax liability you may be liable for when you transfer your assets and the potential Stamp Duty and Capital Acquisitions Tax that your successor may be liable for whether the transfer happens during your lifetime (lifetime transfer) or after your death (inheritance). Although many farm families are cash poor, average land value across Ireland is around €9,072 per acre. Without a plan, you could be lining up substantial costs for yourself and your successor where assets of this value are being transferred - planning ahead allows you to avail of reliefs that can enable farmers to transfer assets to family members tax free (e.g. including gifting a site valued at less than €500,000 to a son or daughter tax-free).
You could consider a partnership so you can continue to draw income from the farm into your old age, or if you want to stay involved in the business. This can be beneficial from an income tax point of view as farm profits are split. Additionally, subject to certain conditions, you may qualify for a tax credit of up to €5,000 per annum for up to five years if you register a Succession Farm Partnership.
Finally, your succession plan, and will, should be reviewed at least once a year and you’ll need to keep family members updated if circumstances change or if you make any changes to your plan.
Ifac’s Farm Report 2019 also found that one in five respondents have identified a successor but not yet formalised their succession plan, thus lining up problems for themselves and their successor.
Now is the time to get started on your plan and farmers are advised to contact their local ifac office, or other professional services provider, for assistance