Farming in limited company

mahoney_j

In now in position where my accountant is advising me to go limited company route for few reasons ….I’ve gone thru bit of what’s involved …advantages /disadvantages etc …interested to hear opinions from anyone that has incorporated and pros /cons they’ve encountered .thanks

Castlekeeper

I'm farming in very limited company, just myself here most of the time...

Getting coat 👋

Wildsurfer

One cost that will hurt is the stamp duty on selling buildings and/or land into the company to build up your directors loan which will allow you draw money out of the company for personal use. I was advised to build up a figure of €600K which cost me €45K in stamp duty.

mr.stonewall

Do most farmers rent the land to the company. This probably becomes an issue if the company buys land. I'm really interested in see where this thread goes, as it's something I have to consider in the next few years. Part time farming, full time job, stuck at the higher tax rate and most investment has been done. Very limited building work to do on farm.

The big one seems to be the exit strategy for the company come retirement and what seems to be the best way to work that

blue5000

Timing is another issue. Lots of lads get the sfp/biss delayed the first year while setting the company up.

mahoney_j

https://www.boards.ie/discussion/comment/120766424#Comment_120766424

It’s been on cards here last 2 years ….lots of capital write offs etc up to that small tax bill ….now amongst others tax bill gone thru roof and capital write offs nearly gone ….have been on income averaging too

company structure seems the next natural step ….allows build some wealth ..directors loan etc but negatives too ….interested to see how this progresses too

mr.stonewall

https://www.boards.ie/discussion/comment/120766444#Comment_120766444

It's a decision that needs planning and at least 48 months to plan

duffysfarm

do you lose a part of your single farm payment if you transfer it to a limited? doesnt seem right but read it somewhere - something to do with clawback

kevthegaff

It's costly enough to change over and alot of work. I'm just switched over as I'm similar J to u with capital allowances etc coming to an end. I say accountants prefer it too rather than getting pressure from farmers and businesses

K.G.

The big thing I d ask is what do you want to do with your life.is building wealth your thing or is lifestyle where its at.my reason for asking that is there's no point in going into a company if you are drawing out a big wage to sustain your lifestyle which will be taxed at the higher rates.on the other hand if want aquire agricultural assets then it is a big help to make it work.but don't be blinded by just tax reductions and if you like your toys it doesn't make half as much sense if the government is only paying 12.5 % of them.it just requires you adopt a different frame to your thinking

MIKEKC

https://www.boards.ie/discussion/comment/120766346#Comment_120766346

If the business was doing so well that you were advised to go the company route why would you need such a large directors account?. In most cases land and buildings are leased to the company

Wildsurfer

A directors loan allows money to be taken from the company in the years ahead for personal use, to help children buy houses, retirement etc. Without it any money taken out will be taxed at the normal rates, so the bigger the directors loan the better really.

MIKEKC

https://www.boards.ie/discussion/comment/120766792#Comment_120766792

48 months.? 4 years to plan. Seems a long time

MIKEKC

https://www.boards.ie/discussion/comment/120770670#Comment_120770670

Yes the bigger the directors account the better. You can qualify for retirement relief at age 55 As far as I know you have to have the company formed 10 years before retirement. If you have high personal drawings you would want to be a seriously high earner to go the company route

mr.stonewall

https://www.boards.ie/discussion/comment/120774154#Comment_120774154

Brain freeze meant 2 years

fulldnod

We went down this road 15 years ago, alot of local "experts" thought we were mad, 1 of the best thing we done

mr.stonewall

https://www.boards.ie/discussion/comment/120774805#Comment_120774805

What were the pros for you entering an LTD

MIKEKC

https://www.boards.ie/discussion/comment/120774805#Comment_120774805

18 years ago here..Working well. Rented the land to the company. Was then able to transfer land to next generation when I felt the time was right No need for a big directors account. The only time you need a big directors account is if you want to give family cash. You can also get a directors Loan from the company .

Tonynewholland

https://www.boards.ie/discussion/comment/120766649#Comment_120766649

Do you know what you must pay to come out of averaging.

mahoney_j

https://www.boards.ie/discussion/comment/120775097#Comment_120775097

From what I know for my situation …none ….timing now for me is proably right but it’s been guts of 2 years of lining things up

Tonynewholland

https://www.boards.ie/discussion/comment/120775402#Comment_120775402

That helps alright and if all the building work is done

fulldnod

https://www.boards.ie/discussion/comment/120774927#Comment_120774927

Tax savings

mahoney_j

Any dairy farmer that switched ….did they register for vat and is it worth doing …….general consensus seems to be no

Injuryprone

https://www.boards.ie/discussion/comment/120776522#Comment_120776522

Why would you register for vat? Can't think of a reason.

Also, don't transfer land and buildings to the company, just rent it which can form part of your wages down the line. Directors loan will still be very sizable amount with stock and machinery.

Get yourself a good accountant who's done a good few of these if your current one hasn't. I switched to one in your county and there was a fair difference in the advice between a few different practices I enquired with (along with some eye watering fees)

Ps don't know how you're still a sole trader. Your tax bill must be heading towards six figures for 2022. Got my own back last week tax for 22 is approx 30% what it would've been had I stayed sole.

mahoney_j

https://www.boards.ie/discussion/comment/120776929#Comment_120776929

On the vat Yeadh agree …..can’t see benefit

leasing the land and buildings and using that as a wage is interesting take …presuming that lease money is treated as a wage then with associated taxes 🤔rather than transferring them all in and ending up paying stamp duty ….but bigger directors loan

I’m in process of securing a mortgage also to buy a house which will be primary residence for rest of our days any pros to lumping that in …..company structure going to be long term thing for me 20 years to my mid 60s kids still young …..farm debt now at manageable level but 1/2 opportunities may come my way in near future

Injuryprone

https://www.boards.ie/discussion/comment/120777042#Comment_120777042

Your directors loan is going to be the best part of 500k as it is. Can't remember now but there's probably other reasons not to put the land in other than stamp duty. Maybe how do you get it back out, I forget.

Tbh, you sound like you're in need of a good sit down with 3 or 4 different accountants to thrash out all the different options. They'll all give you an hour if you're a potential customer

mahoney_j

https://www.boards.ie/discussion/comment/120777167#Comment_120777167

👍….meeting alternate accountant for second opinion next week ….

Wildsurfer

I am leasing the land to the directors(wife and I) at a value up to limit of lower tax threshold. But you can't carry debt into the company so if you have debts of say 300K the first 300K of selling stock and machinery into company will be used up offsetting that and won't be available for your directors account.

K.G.

https://www.boards.ie/discussion/comment/120777042#Comment_120777042

In my opinion I wouldn't transfer property to a farming company but I would and did buy a property through it.you have to think a head as to how you might transfer assets to the next generation and personally I'd be slow to hold all the property through the company.for instance.i m thinking about using the loan to buy a property which would not be in the companies name which I forsee m8ght go to of the children

Wildsurfer

When you say you bought property through the company do you mean land or a rental property?

yosemitesam1

https://www.boards.ie/discussion/comment/120777042#Comment_120777042

Can you do a long-term tax free lease to the company. Don't know what the limit is?

Incorporated here. Don't see any downsides. Allows me more flexibility for savings/pension as demand for drawings would be low.

Went unlimited as there wasn't going to be any benefit for the extra work.