Outside blocks

straight

I wouldn't see the point of all the work and farming if I couldn't substantially expand my land base through purchasing.

My accountant tells me that one buys land outside of the company and not within.

Jack98

https://www.boards.ie/discussion/comment/121374456#Comment_121374456

Well it’s joining the milking platform and would add significantly to land owned, I only have to be in office 2/3 days every week and work from home the remainder so that lessens the off farm workload and offers flexibility compared to someone traveling to off farm work 5 days a week. Would be able to better utilize other current rented ground also by expanding cow numbers on home farm and dropping the beef side it would simplify the current system greatly.

I get the whole buy land outside the company argument but if you’re going to be farming for 30+ years it won’t be an issue until you decide to retire and there’s no one to step in?

Bass Reeves

https://www.boards.ie/discussion/comment/121374568#Comment_121374568

Invariably buyer are willing to pay more within a company structure. Take it you're case would you. E more Willing to pay 10k/ acres outside a company structure or 13-14 within the structure.

The savings are not as many think they will be. If you intend to pay it outside a company structure every one looks at the high rate of tax effectively 50%, but all the money may not be paid at that rate. Existing capital allowances may shelter money being drawn down. If you are going into a company structure to buy the land you will have few capital allowances so effectively it's a 12.5% on tax rate on the land cost itself within a company which is the majority of the payment. But you own average tax rate for drawing down that money may be 25-40% on average or a saving on 12-28%

The interest is tax deductible in both cases at 12.5% and you marginal tax rate so it's not true to say if you're repayments are 35k you need to draw down 70k.

The catch is getting the land out of the company. If you have to pay tax to remove it from the company effectively you may need to borrow again to bring it out tax efficiently or use your 750K allowance to remove it from the company.

Farmers are fooling themselves byi g land within a company in many cases. There are other risks you may want to invest in other projects within this company that may put the jand at risk if anything goes wrong

Jack98

https://www.boards.ie/discussion/comment/121374991#Comment_121374991

Surely the benefits would outweigh the cons in this scenario?

Less taxes paid so more money free to make repayments had two huge tax bills last two years with limited capital allowances so better off putting some of that money to work than paying the tax, use allowance down the line to remove the land as you can contribute to a pension through the company anyway so won’t have to rely on the withdrawal allowance down the line when retiring.

Being able to keep off farm income seperate too to company which will add to repayment capacity for the next 10 years or so.

Siamsa Sessions

Posting here as buying stuff and financing is relevant: the SBCI government loan scheme is open again. Interest rate of 4.5% according to the AIB lady I spoke to this morning.

jaymla627

https://www.boards.ie/discussion/comment/121375310#Comment_121375310

Are you sure that's all in our plus euriobar, finance ireland are at 8% for the sbci energy efficiency scheme

Bass Reeves

https://www.boards.ie/discussion/comment/121375116#Comment_121375116

Maybe and Maybe not. With land purchase it is much more variable. The largest part of the repayments are out of post tax profits in both cases.

Any capable tax advisor will describe pensions as tax deferred. There is no guarantee the substantial allowance at the higher tax rate will be available in 10 years time. There is no guarantee that the substantial allowances for retirement relief out of a company will be there in 30-40 years neither is there a gaurantees about the way pension lump sum are treated separately to company retirement relief.

However we will move 30+ years down the road and if structures are as at present and you for any of a variety reason want to take it out of the company ( even a site off it for a child). This is treated as a company disposal and you will use up your company retirement relief if it's there or your spouse's. If not you have to pay tax on the value at the highest rate on it value as well as paying capital tax on any increase in value within the company

Now giving the company to a child may not be viable as there is likely to be stock and machinery with substantial value in it attached to the farm or may even another business.

If the difference in tax treatment and costs was less than 20% I think I would buy outside the company structure, if it is greater than 20% I think about it, if I needed to drawn down all the money at the high tax rate I would probably do that.

Remember the famous directors loans these can be used to repay it as well outside the company structure.

jaymla627

https://www.boards.ie/discussion/comment/121374456#Comment_121374456

Did you buy the bit beside you after, that was offered to you?

Jack98

https://www.boards.ie/discussion/comment/121375414#Comment_121375414

I also presume the withdrawal limit is per director so would you not be therefore able to add your spouse as a director also prior to retirement and double your withdrawal limit then upon retirement?

Im sure there’s many ways around being left liable for a large tax bill down the line when you go to withdraw land if bought through the company and anyway it would only be withdrawn if there was no one in place to step in at that point in time and take over.

Jack98

https://www.boards.ie/discussion/comment/121375310#Comment_121375310

Is the length of the SBCI loan term still capped at 10 years?

straight

https://www.boards.ie/discussion/comment/121375701#Comment_121375701

Ya. Worked out cheaper than the outside block I bought earlier in the year.

anthony500_1

https://www.boards.ie/discussion/comment/121375724#Comment_121375724

Just looked up t&c it's saying 6yr max term length

GrasstoMilk

https://www.boards.ie/discussion/comment/121375364#Comment_121375364

Boi are 5.2% for green money and 5.45% for non green money as off this morning

jaymla627

https://www.boards.ie/discussion/comment/121376453#Comment_121376453

Is that re the sbci route? Their business lending unit are circa 7.5% non secured and 6.5% secured, can't get a call-back of their agri-lending unit re other types of loans/rates available

Jack98

https://www.boards.ie/discussion/comment/121376489#Comment_121376489

Credit union have cultivate land loans secured up to 300k at 5.49% in select branches nationwide also.

Siamsa Sessions

I’m only going on what AIB said today re SBCI loans. I didn’t get into a discussion with the lady as I’m not ready to apply yet. I’m meeting the accountant on Monday so I’ll see if I’m applying for anything then!

Re duration: she said 7 to 10 years max

Bass Reeves

https://www.boards.ie/discussion/comment/121377165#Comment_121377165

The term of the loan depends on the amount borrowed.

Donald Trump

https://www.boards.ie/discussion/comment/121375310#Comment_121375310

Is buying land not explicitly excluded from that scheme?

GrasstoMilk

No more grass silage in the diet till November 🤞

K.G.

https://www.boards.ie/discussion/comment/121880110#Comment_121880110

I think you might be jumping the gun pissing down here

leoch

Did u ever buy the land jack

mahoney_j

https://www.boards.ie/discussion/comment/121880110#Comment_121880110

You’ll be doing well …..interesting to see how the z grazer goes for you….

GrasstoMilk

https://www.boards.ie/discussion/comment/121880481#Comment_121880481

I’ll let you all know at the end of the year

should be an easy enough comparison as we never did it before and we’re starting out from the start of the season with it

cows out full time the last week. Doing a bit of damage but nothing major

will most likely be brought in later

Jack98

https://www.boards.ie/discussion/comment/121880390#Comment_121880390

Bought half of what was for sale and our neigbor bought the other half. Worked out just under 24 acres at about 10k an acre all in fees and all, bought in my name to avail of the stamp duty exemption. We’re farming in a company since March 1st also and the company will pay for the land but it stays outside of it as it was bought outside of it. All in all happy with how it went.

leoch

Good on u best of luck and u and ur neighbours are in good terms still I'd say .....even better

Jack98

https://www.boards.ie/discussion/comment/121880964#Comment_121880964

Thanks, we’re on very good terms after it all anyway and always had been anyway so was no need to fall out over it. My neigbor has a son a year older than me at home full time with him as well so good to maintain relations for the future too, there was no one strong arming the other we worked together since it went up for sale.

Tileman

https://www.boards.ie/discussion/comment/121881087#Comment_121881087

Your lucky jack. That was very reasonable money the way things are gone. Good that ye were able to buy it between ye.

was their many bidders on it. Was it a public auction or private.

Jack98

https://www.boards.ie/discussion/comment/121881112#Comment_121881112

Private treaty no other bidders, had two parties walk it and backed off when our bid went in wasn’t accepted but man selling it accepted slightly more then first bid which was fair to all parties. This isn’t golden vale land but decent quality for our area, I would say it was more than fair for it.

Gman1987

https://www.boards.ie/discussion/comment/121881240#Comment_121881240

@jack98, do you mind me asking did you try a few banks for the loan and what the interest rate is like? Have to make an enquiry myself but would like to know roughly what the going rates are before speaking to them

Bass Reeves

https://www.boards.ie/discussion/comment/122000013#Comment_122000013

POH trying go borrow at present. Hoops to jump through are unbelievable. It took.the young lad about 4-5 months to sort a mortgage.

Trying to sort an SBCI loan at present because its not with my own bank ot now running to over ten weeks with this bank.