TAX

100% for the jeep like. Nothing for the car. Thought it was fair enough. My accountant is known to be very good and I know several people that had tax problems and moved to them and are very happy. I only ever had one accountant so far.

Fear of the unknown is probably a big part of it. Need to educate myself a bit better on the subject.

I often thought it was just for the big boys and girls and that I wouldn't be worthy myself seeing as I only milk 70 -80 cows. From talking to my accountant and banks when I go for borrowings, they genuinely seem shocked with the higher level of profits compared to my peers.

Have all my capital spending and machinery building done. All that I have left to buy is land if I am lucky enough to get the chance. I don't need to draw any money from the farm to any great extent.

This is a situation where incorporation sounds like a runner. But you would want to be sure that the current position is likely to continue for the next few years. We wouldn't have many farmer clients with an off-farm income going into top rate tax band that have farm profits in the region of €25,000. You are either the exception or an exceptional farmer.

We would only advise the incorporation route if a substantial level of income is being taxed at the top rate of tax, after all other avenues have been explored.

Correct. Buildings do not normally go into the company for various other reasons. It just doesn't usually make sense. And buildings allowances cannot be claimed against the rental income that would be paid to the farmer by the company. So, first thing to watch out for is are there much building allowances left to be claimed. These are written off over 7 years, so the stupidest thing to do is build a big shed/parlour etc in 2021 or 2022, claim allowances for 1 or 2 years, then start thinking about a company. Crasy stuff.

The machinery transfers over to company at TWDV at date sole trade/partnership switches to the company. Company then owns the machinery.

A directors current account is created when company is formed. Stock and machinery are 'bought by company from sole trader/partnership. No money changes hands but a loan is created in the company. This should be kept as high as possible. But again, like the earlier discussion re motor vehicles, it cannot be ridiculous either. Farmer can then extract money from the company tax free until the loan is cleared. But also a salary and rent are paid to farmer to maximise the standard rate tax band.

Company can be set up in a week/ten days. Setting up the bank account in the company name will probably take longer to be honest.

Remember if you incorporate the money is no longer yours. Its now company money

You will pay 15% tax to any profits in an incorporated company and the accountant will be more expensive as they will charge you for both sets of accounts you personal accounts and your company accounts.

On your farm profits of 25 k you now pay 13k. in the new senario you will pay 3750 euro plus another 6-700 extra in accountancy fees minimums maybe even a tad more. There will be extra costs as well such as if you register a child as an employee.

Remember this may only be a short term issue if you have children they will be available when they get to 14/15 to use up tax issues. While you can employee them through the company as well and before paying tax on profits the benefit of incorporation is not as noticeable.

The main advantage of incorporation is if you want to buy land down the line or carry out other investment, however if you want to access the money you still have a tax issue but you have already paid 15% on it and now have personnel tax again. You could have a couple of 100k in the farm account and have no real use within the company for it and accessing it outside the company will see 50% go to the tax man.

Pension contributions for yourself or spouse should be done before incorporation as well

I am semi retired and I have postponed drying my pension as I am using all tax allowances for farm/rental profits.

Over the next couple of years some of the spending will be more lifestyle choices rather than paying tax.

You can sell in buildings to increase your directors loan but you will have to pay stamp duty on the sale, so short term pain for a long term gain. On not incorporating because you have capital allowances left I wouldn't agree, we did the sums here and bottom line was even after including capital allowances it still made financial sense to incorporate, and especially for dairy farmers I would think they will be exorbitant tax bills next year. Its not as if one won't ever build again, if anything you will have more cash on hand to consider such projects.

As I already said, each case is different. That's why people need to talk to their accountant rather than people on Internet.

Re buildings, you clearly don't get my point. Most big dairy farmers are incorporated at this stage.

Most, that had large plans re new buildings, got good advise. Took the advise. Incorporated. Then built, through company, using the after tax profits to help fund it, along with bank finance.

I don't see the point in being tax inefficient and casually throwing away well earned capital allowances when there are often other ways to reduce tax.

There will be a lot of people incorporating over the next year or so if milk price stays high and people realise the tax bills they are facing. Its kind of obvious that a person will consult an accountant to discuss the best options, but talking it over with people who have already gone that route be it on the Internet or a discussion group etc is a good first step even if to give you an idea of what you should be asking your accountant.

I agree 100%. But my point is that most of the big hitters lets say, are already incorporated. Those smaller dairy farmers, operating up to this as a sole trader, are facing huge tax bills for 2021 and 2022. Probably biggest ever, even with the newish personal tax credits for self employed, higher tax bands and lower rates of USC. However, in my opinion, most of these farmers wouldn't have much buildings in recent years so aren't losing out on incorporation. So, it makes sense for them. I'm only talking about the person who changed to dairy farming in lets say 2017. First few years, a lot of capital outlay, took a large chunk out of the profits. No tax issues. Now, the building allowances are only taking a smaller bit off the profits, leaving the big tax bills. They are thinking about incorporating. I say, hold on. Think about it very carefully. What are your weekly spending levels? What loans are outstanding for land etc? What are the succession situation like? Its not just a matter of forming a company and no more tax. If there are big families with no other income apart from the farm, there will be PAYE on the wages taken from company.

Ya but if you want to take 50k out to give to a child or want money for investment outside the company. Yes you can get investment put into the company back out but drawing can be at a significant cost. A lot depends on if the spouse is working off farm.

You said about building going in and drawing back the investment. The disadvantages are these are also around the house. If the company ever went bankrupt then you could have another farmer milking cows in your yard

Well if you cannot understand my point we will leave it at that

There is a good few out there that would be but have nice shiny tractors, livestock boxes and landcruisers.

Saw a factor agent that has bought a new jeep lately, he went up 10 years. I suspect that it's taxation issues. I bet you he has no pension fund.

I seen a work maybe go and spend nearly 30k on a tractor ten years ago because he had a tax issue. He only told me afterwards. I explained to him about employing children he never knew about that.

Some accountants ( especially smaller sole accountants) can be very poor or reluctant with tax advice. Most farmers are not the most astute business people.

While you need to get an accountant to tailor your particular situation it's the different available options or long term outlook that you get here that often may not be available from an accountant.

Just bought a new jeep last year. Full capital allowance over the next 8 years. All diesel and running costs are farm expense.

The wife's car doesn't come near the farm accounts.