The Succession Farm Partnership Scheme effectively gives a farmer and their successor a tax incentive where the farmer and successor enter an approved partnership which culminates in the transfer of at least 80% of the farm assets to the successor.
The scheme provides for an annual tax credit worth up to €5,000 per annum for a five-year period.
The scheme is being administered through Teagasc.
What do we need to do to get the tax credit?
Firstly, those seeking to avail of the relief must be participants of a registered farm partnership, and must apply to be included on a register of succession farm partnerships.
In order to be registered on the register of succession farm partnerships, a registered farm partnership must have at least two members.
At least one of the members (the farmer), must have been farming for at least two years prior to commencement of partnership, farming at least three hectares of usable farm land.
The second member (the successor) must have an appropriate qualification in agriculture, or a qualification of equivalence as determined by Teagasc, and under the terms of the farm partnership, the member must hold an entitlement to at least 20% of the profits of the partnership and be under 40 years of age.
In advance of approval, a business plan must be submitted by the farmer, the farmer shall enter an agreement with one or more than one of the successors to transfer or sell at least 80% of the farm assets to the successor, or successors, within a period of three to 10 years after the date that the succession farm partnership application is made.
At the outset, the plan must specify:
- the farm assets of the farm partnership on the day that the application is made;
- any conditions to which the transfer or sale will be subject;
- the year in which the proposed transfer may take place; and,
- any other terms agreed between the farmer and successor, or successors, including in relation to the farm assets, the conduct of the farming trade, or the creation of any rights of residence in dwellings on the farm land.
How does the tax credit work and how much is it worth?
The tax credit available is worth up to €5,000 per annum, split in line with the profit sharing ratio.
The credit is reduced where the profits of the partnership are below this level.
The tax credit is available in any year where the successor is aged 40 or under.
What happens if circumstances change or we withdraw from the plan?
If either party chooses to withdraw from the plan, the tax credits claimed by all parties are repayable.
What are the first steps we need to take?
There is a significant commitment to entering into a Registered Farm Partnership so all parties should consider it very carefully. These include an agreement to transfer 80% of the farm within a 10 year period, and other administrative arrangements such as a joint bank account for the partnership, a signed partnership agreement, a business plan for the partnership.
As a first step, you should read Teagasc Documentation on the scheme and contact Teagasc for further advice.