Farming as a Company

maxxuumman

anyone here move to farming as a company.
I intend moving before the end of the present tax year, just wondering has anyone here any experience of this. Any major pros or cons. Any major hurdles to get over?

lakill Farm

i have 2 clients farming as a company.

No1 - Paperwork. you really have to be on top of it.

No2 - CRO and ARD date - Miss it and you lose audit exemption for 2 years and about 2k extra fees

No3 - Fees to do year end accounts, Corporation tax return and also directors income tax.

freedominacup

lakill Farm wrote: »

i have 2 clients farming as a company.

No1 - Paperwork. you really have to be on top of it.

No2 - CRO and ARD date - Miss it and you lose audit exemption for 2 years and about 2k extra fees

No3 - Fees to do year end accounts, Corporation tax return and also directors income tax.

Am I right in saying that moving money in and out of a company is a lot more complicated than a sole trader moving money between accounts?

delaval

maxxuumman wrote: »

anyone here move to farming as a company.
I intend moving before the end of the present tax year, just wondering has anyone here any experience of this. Any major pros or cons. Any major hurdles to get over?

If you are leasing land on a long term lease the landlord cannot claim relief on rent if leased by a company.
One of my landlords actually has this in the lease terms.

If you are making a large investment in land on borrowed money you would probably be better in a company as you will only pay corporation tax on principal payments. If not you will pay at marginal rate then at high rate.

I seems to be a bit of a fashion, I often wonder is it acountants looking for work? Perhaps a bit unfair but there was no mention of it when building boom was in full flight;);)

maxxuumman

delaval wrote: »

If you are making a large investment in land on borrowed money you would probably be better in a company as you will only pay corporation tax on principal payments. If not you will pay at marginal rate then at high rate.

that's the reason I'm going that way no point paying over 50% on capital repayments, tax would become a major issue later in the later years of the loan.
What is the story with herd number, did you have to get a new one or did you transfer the old herd number onto the company.

delaval

maxxuumman wrote: »

that's the reason I'm going that way no point paying over 50% on capital repayments, tax would become a major issue later in the later years of the loan.
What is the story with herd number, did you have to get a new one or did you transfer the old herd number onto the company.

We are not in a company, we bought land with a company and rent it from the company. All debt relating to purchase is in the company.

loveta

What size scale would you need to be talking about to be worth while considering trading as a company eg. 150k turn over or say 300k was thinking of the same because this tax is getting to be a major pain in the hole but would the ends justify the means

maxxuumman

loveta wrote: »

What size scale would you need to be talking about to be worth while considering trading as a company eg. 150k turn over or say 300k was thinking of the same because this tax is getting to be a major pain in the hole but would the ends justify the means

I don't think it is down to turnover. I think it's more down to your drawings as a percentage of the farm profit. If your drawings are all or most of the farm profits, then there is no point. If your drawings are low and you want to leave money in the business, then it should be looked at.

dar31

loveta wrote: »

What size scale would you need to be talking about to be worth while considering trading as a company eg. 150k turn over or say 300k was thinking of the same because this tax is getting to be a major pain in the hole but would the ends justify the means

turnover wouldnt matter
would want to be consistently paying at the high rate of tax

if you are setting up a co. create as much of a directors loan as possible at the start.

loveta

Was with the accountant last year tidying up a few figures trying to reduce my tax amount and she reckons i am "just going to have to get use to" paying what i would consider a fairly large tax bill and was wondering why she never mentioned the company route but maybe it just would not be worth it to me

delaval

Profit=tax..................profit good

bob charles

I would see very little benefit for most farms farming as a company, just making things very awkward, maybe a change of accountant might be a better idea to start. but If you are considering buying land it maybe a good idea considering land repayments arent written off against tax. I was amazed by what a few said recently that their tax bills were vs their profit figure.

loveta

delaval wrote: »

Profit=tax..................profit good

true but when ya bust a nut to make repayments then get a kick in the other one in the from of tax on the repayments "less the interest" ya would wonder would ya be better of sitting around scratching yourself and that corp rate looks sooooooo tempting :rolleyes:

bob charles

delaval wrote: »

Profit=tax..................profit good

tax=giving your hard earned money to useless bastards

Tipp Man

bob charles wrote: »

tax=giving your hard earned money to useless bastards

I'll second that

Farmer Pudsey

dar31 wrote: »

turnover wouldnt matter
would want to be consistently paying at the high rate of tax

if you are setting up a co. create as much of a directors loan as possible at the start.

loveta wrote: »

true but when ya bust a nut to make repayments then get a kick in the other one in the from of tax on the repayments "less the interest" ya would wonder would ya be better of sitting around scratching yourself and that corp rate looks sooooooo tempting :rolleyes:

While the Corp rate is only 12.5% you have to remember it may not always be the same. I know the chances are small however a rise to 20% would skew all your figures.

You would want to be leaving large amounts of money in the company however you have to remember it may be hard and expensive to extract down the line when kids go to college.

I have seen companies advised when there were other options available. I have also seen accountants fail to use available options to reduce tax bill.

Even in company accounts I do not know if capital repayments can be classes as expenses where the capital value of the purchase (land) will not reduce.

maxxuumman

Farmer Pudsey wrote: »

Even in company accounts I do not know if capital repayments can be classes as expenses where the capital value of the purchase (land) will not reduce.

But you're only paying 12.5tax on the capital repayments and not 50

6600

maxxuumman wrote: »

But you're only paying 12.5tax on the capital repayments and not 50

What you are saying would apply if the company had bought the land. Generally having land in a company is a bad idea though as there is a double tax charge charge if the land is ever sold, the company pays capital gains tax on the sale and you then have to pay income tax to get the money out of the company. If it was me I would rather have the land in my own name. In that case then you pay income tax when you withdraw money from the company to repay the loan which is in your own name.

The advantage of a company is that you only pay income tax on the money you take from the company rather than on the business' profits. The profits left in the company are subject to Corporation Tax. Only worth doing if your profits are consistently higher than your drawings. But bear in mind that whenever you take those profits they are subject to income tax.

Farmer Pudsey

maxxuumman wrote: »

But you're only paying 12.5tax on the capital repayments and not 50

In theory yes but if you ever want to remove this from the company it is very tricky. Most company set up leave existing lad external and rent it to the company.You would want to have a very big operation to justify company status.

Remember if the land is bought by the company the company own's it not you. If you wish to sell down the line and you need the money you will still pay tax on it and it will alll be at the high rate more than likly as you extract it. I am not sure if the company has to pay capital gains tax on any land sale profit.

If you decide to sell a site the value is within the company.

Like an earlier poster stated I wonder is this a way for companies to make more money for themselves.

Accountants fees for a company set will be a minimum of around 3K including you own personnell tax fees

6600

As an accountant myself I can see how others are pushing company status as a way to increase their fees. It does have advantages but only where profits are consistently high.

There was a loophole in the milk quota regs that allowed a company which had leased land and quota the option to buy the quota after one year. This option was only open to farms trading as companies and was clearly unfair. This loophole has recently been closed. This is the reason a lot of dairy farmers formed companies in the last few years.

19driver83

My understanding is that you cannot transfer capital allowances to a company so if you have made investment in the last few years you will loose these capital allowances. i.e. as a sole trader if you spend 80K on shed. you can put 10K a year for 8 years as an expenditure.

If you build a shed through the company on your land it will be the company that owns the shed but you own the land that the shed is built on...complicated!

The big positives for me of a company is being able to claim the VAT back which is a big positive when buying machnery, feeds, fertiliser, accountant.

You can also pay into a pension tax free which people may not see as a big positive now but you will be thankful in the future.

People should not fear a company because of the paperwork. If your farming you are doing far more paperwork registering calves. You do VAT returns every 2 months, Income tax every month which you can set-up a direct debit for, CRO & Corporation tax once a year which the accountant looks after.

kenwilliam

I was amazed by what a few said recently that their tax bills were vs their profit figure. LM7805

6600

19driver83 wrote: »

If you build a shed through the company on your land it will be the company that owns the shed but you own the land that the shed is built on...complicated!

The big positives for me of a company is being able to claim the VAT back which is a big positive when buying machnery, feeds, fertiliser, accountant.

You can also pay into a pension tax free which people may not see as a big positive now but you will be thankful in the future.

People should not fear a company because of the paperwork. If your farming you are doing far more paperwork registering calves. You do VAT returns every 2 months, Income tax every month which you can set-up a direct debit for, CRO & Corporation tax once a year which the accountant looks after.

You don't have to be in a company to be registered for vat. Whether trading as a sole trader or company, any farmer can opt to register or be a non-registered farmer if they wish. No vat on feed or fertilizer either.

The 100% correct way to ensure the company can claim the capital allowances is to transfer the yard into the company. I have seen a number of people do this. Legal fees involved though.
Alternatively you could keep the buildings out of the company and offset the remaining capital allowances against rent paid to you by the company. This is fine but what happens when you want to build another shed? As you said its complicated and would want to be worth it from a tax saving point of view.

Farmer Pudsey

19driver83 wrote: »

My understanding is that you cannot transfer capital allowances to a company so if you have made investment in the last few years you will loose these capital allowances. i.e. as a sole trader if you spend 80K on shed. you can put 10K a year for 8 years as an expenditure.

If you build a shed through the company on your land it will be the company that owns the shed but you own the land that the shed is built on...complicated!

The big positives for me of a company is being able to claim the VAT back which is a big positive when buying machnery, feeds, fertiliser, accountant.

You can also pay into a pension tax free which people may not see as a big positive now but you will be thankful in the future.

People should not fear a company because of the paperwork. If your farming you are doing far more paperwork registering calves. You do VAT returns every 2 months, Income tax every month which you can set-up a direct debit for, CRO & Corporation tax once a year which the accountant looks after.

Feed and fertlizer is 0% vat rated. You also have to remember that on vat registering you lose the vat rebate on milk and beef. You also have to do more complicated accounts which cost more. If you then contract out you have to charge vat. I know a two Agri contractors and both are VAT negative. On top of that one of them loses the vat rebate on his milk and beef sales.

Also when you vat register it is nearly impossible to de register.

weekendfarmer

Setting up a company just to leave profit in as a nest egg as a stragedy is a non runner as you will be hit with profit retention tax.

Manoffeeling

bob charles wrote: »

tax=giving your hard earned money to useless bastards

Populist nonsensical dribble. :rolleyes:

Swop 'tax' with 'subsidies' and see what happens

freedominacup

Manoffeeling wrote: »

Populist nonsensical dribble. :rolleyes:

Swop 'tax' with 'subsidies' and see what happens

People start trying to get your home address so's that they can call by to subject you to some gentle re-education:eek:

weekendfarmer

Manoffeeling wrote: »

Populist nonsensical dribble. :rolleyes:

Swop 'tax' with 'subsidies' and see what happens

Swop with bankrupt farmers and see what happens to your plate on a sunday

Hope you enjoy horse burger

Manoffeeling

weekendfarmer wrote: »

Swop with bankrupt farmers and see what happens to your plate on a sunday

Hope you enjoy horse burger

Bacon and cabbage with spuds. Show me the subsidised commodity?

weekendfarmer

You don't like butter on your spuds ...

Manoffeeling

weekendfarmer wrote: »

You don't like butter on your spuds ...

By trying to smart, you are silently agreeing with me, or at most, acknowledging that I am making a very valid point.

weekendfarmer

There are other threads for ranting .... This thread is about tax effiecienty measures for hard working people

Manoffeeling

weekendfarmer wrote: »

There are other threads for ranting .... This thread is about tax effiecienty measures for hard working people

:rolleyes:

It's about farming as a company.

lakill Farm

6600 wrote: »

As an accountant myself I can see how others are pushing company status as a way to increase their fees. It does have advantages but only where profits are consistently high.

There was a loophole in the milk quota regs that allowed a company which had leased land and quota the option to buy the quota after one year. This option was only open to farms trading as companies and was clearly unfair. This loophole has recently been closed. This is the reason a lot of dairy farmers formed companies in the last few years.

I totally agree, both my farmers farming as companies are clients who are companies before i started acting as agent.

Have a new client who I recommend to go as Ltd company because he hopes to finish 600 cattle a year so that big turn of cash and he hopes to clear €200 a head profit. but on the side i recommend he is keeping his suckler enterprise as a sole trader.

weekendfarmer

lakill Farm wrote: »

I totally agree, both my farmers farming as companies are clients who are companies before i started acting as agent.

Have a new client who I recommend to go as Ltd company because he hopes to finish 600 cattle a year so that big turn of cash and he hopes to clear €200 a head profit. but on the side i recommend he is keeping his suckler enterprise as a sole trader.

Its that easy to get 2 herd numbers ?

lakill Farm

weekendfarmer wrote: »

Is it easy get 2 herd numbers ?

Farmer A - Sole trader - herd No.

Ltd Company - Herd No. (its a seperate legal identity)

The farmer and the company are 2 seperate "persons"

Lots of dealers have 2 herd numbers.
1 for there farm animals and 1 for animals they buy and sell as a trade

Manoffeeling

If a farmer is registered for vat, is he/she half way there in terms of paperwork?

delaval

Manoffeeling wrote: »

If a farmer is registered for vat, is he/she half way there in terms of paperwork?

Vat registration and incorporating ..............two completely seperate acts

bob charles

lakill Farm wrote: »

Have a new client who I recommend to go as Ltd company because he hopes to finish 600 cattle a year so that big turn of cash and he hopes to clear €200 a head profit. but on the side i recommend he is keeping his suckler enterprise as a sole trader.

I would let him trade for a year and see if he makes the proposed €120k:D:D, I bet this man will have little tax problems after year 1 if he think he is going to make €200 a head.

At what cut off would you reccommend going down the company route, profits over 50k 100k, 200k?

Manoffeeling

delaval wrote: »

Vat registration and incorporating ..............two completely seperate acts

I assume if starting a company, they would automatically register for vat.

6600

The requirement to register for VAT is the exact same for a company as a sole trader. If your sales of goods and services are over the thresholds of €75k and €37.5k then you have to register. There is no threshold for agricultural produce sales. You can opt to register for VAT regardless if you think it makes sense.

Just because you are setting up a company does not mean you have to register for vat. It has nothing to do with it. Also perfectly fine for a farming company not to be registered for VAT.

weekendfarmer

bob charles wrote: »

I would let him trade for a year and see if he makes the proposed €120k:D:D, I bet this man will have little tax problems after year 1 if he think he is going to make €200 a head.

Animals bought it @ 320Kg around march and off loaded in septemeber?
ever year wouldn't be like this ...

Farmer Pudsey

lakill Farm wrote: »

I totally agree, both my farmers farming as companies are clients who are companies before i started acting as agent.

Have a new client who I recommend to go as Ltd company because he hopes to finish 600 cattle a year so that big turn of cash and he hopes to clear €200 a head profit. but on the side i recommend he is keeping his suckler enterprise as a sole trader.

weekendfarmer wrote: »

Animals bought it @ 320Kg around march and off loaded in septemeber?
ever year wouldn't be like this ...

There is a big difference between turnover, margin and profit. I doubt if any finishers are making a margin of 200/head not to mind profit.
Turnover can often be described as the difference cost and sale, in turn margin is the amount left after direct costs. Profit is the amount you have left after indirect costs are taken out.

On the figures this lad if he is winter finishing will need a difference between the in and out price of nearly 600 euro to amass a 200/head profit on a seventy day finishing period.

weekendfarmer

I only bring mine to 11 months max, majority of them gone for winter

But was thinking of reducing cows and buying in weanlings in March, house for a few weeks and then out on grass until
september ... (farm split so would have 2 separate places, stock not mixing)

Buying in at 300-320kgs and on grass/1.5kg of meal a day surely they's leave 200 profit on average over the years?

Tipp Man

weekendfarmer wrote: »

I only bring mine to 11 months max, majority of them gone for winter

But was thinking of reducing cows and buying in weanlings in March, house for a few weeks and then out on grass until
september ... (farm split so would have 2 separate places, stock not mixing)

Buying in at 300-320kgs and on grass/1.5kg of meal a day surely they's leave 200 profit on average over the years?

What do you think your typical buying price will be?
How much weight do you think they will put on in your average year?
What do you think they will make sale price at the end of the year?

LivInt20

Farmer Pudsey wrote: »

There is a big difference between turnover, margin and profit. I doubt if any finishers are making a margin of 200/head not to mind profit.
Turnover can often be described as the difference cost and sale, in turn margin is the amount left after direct costs. Profit is the amount you have left after indirect costs are taken out.

On the figures this lad if he is winter finishing will need a difference between the in and out price of nearly 600 euro to amass a 200/head profit on a seventy day finishing period.

Turnover is not the difference between cost and sale.

It is quite simply Total Sales.

Anybody describing it as something else is wrong.

Gross Margin is the difference between cost and sales before costs are taken into account.

weekendfarmer

@LivInt20 ... if say 2 men set up a company and bought land. How long would it take
to get a herd number?

LivInt20

weekendfarmer wrote: »

@LivInt20 ... if say 2 men set up a company and bought land. How long would it take
to get a herd number?

Would take a while.

By the time land transfer went through. This is the bit that would take time.

Dept should be able to tell you how long it takes to receive a herd number.

lakill Farm

Manoffeeling wrote: »

If a farmer is registered for vat, is he/she half way there in terms of paperwork?

in terms of doing year end accounts? yes once your doing debtors, creditors, vat, and bank recs. :rolleyes:

lakill Farm

bob charles wrote: »

I would let him trade for a year and see if he makes the proposed €120k:D:D, I bet this man will have little tax problems after year 1 if he think he is going to make €200 a head.

At what cut off would you reccommend going down the company route, profits over 50k 100k, 200k?

every case is different.

easy to say profit of €100k.
sure you might have capital allowances of €70 or 80K.
i would normally assess taxable profit over a 3- 5 year period based on historic info or indeed based on up to date Management accounts or projected profits.

richie123

bob charles wrote: »

tax=giving your hard earned money to useless bastards

well said.