Are you happy to run the farm at a loss?

locky76

Hey folks,
Just doing the farm accounts and that perennial question crops up?
Am i happy running the farm at a loss?
I've upped my numbers significantly over the past three years whereby my income is around 3 times what it was three years ago, however with the lag of increased expenses with extra stock this hasn't come through yet in profit as I have been upping every year, I'll be finishing 15 more next year than this year (next year Rodney and all that)...
Anyway for part-timers are you happy to run the farm at a breakeven/loss if it means that you can improve the farm and make it easier to work- cattle handling facilities, water troughs, paddocks, decent tractor, decent sheds etc...
The alternative is to rent out the place for the handy €150 an acre however the place goes to rack and ruin over a sustained period of this thus diminishing the overall value of the place and putting an even greater burden on the next man to take it over...

Juniorhurler

For a short period yes. I mean about the first three to four years and then if the place is not paying its way it is time to look at what the effort is for. I have a young family and like to spend time with them so my time away has to have at least light at the end of the tunnel or at best contribute to the family income. Unfortunately at the moment I am in year three of a cycle but things do look much better for next year much like yourself.

Western Pomise

You would often wonder if you would be as well reducing nos,ESP with suckling....and even letting part of land for a guaranteed income,
I don't give in to the theory of a farm or a portion if it going to rack and ruin if rented,it's all about who you rent to.

milkprofit

quoteThe alternative is to rent out the place for the handy €150 an acre however the place goes to rack and ruin over a sustained period of this thus diminishing the overall value of the place and putting an even greater burden on the next man to take it over...
not true if u sign contract
i have land taken for 15-20 yr short term and it is 200% better,
drained reseeded index 3 level fenced
it is your land u are in control

loveta

When i started out farming i put back nearly every penny into it again between quota reseeding drainage sheds and machinery worked stupid hours and took of farm work in the winter to help pay for farm "treats" quad, electric tools ect ect. I felt i was the effort that i needed to do on this farm to have it up and running the way it is today where i am making money and am happy at it the only problem now is i am being fu~king slaughtered with tax.... :0(

Now to the renting of the place this is a double edged sword, Are you farm proud or just in it for the money??
The reason i ask this is put it up for rent get a real good expensive price for it and the poor ejit that has it wont be long figuring out he is on a looser so he will try and suck the life out of the place to break even and wreck the joint in the doing so.

Now you could go the route of a lease to a say a dairy guy "better income" set up a plan "WITH" him what ya want eg % reseeded ect ect, dont want out wintering ect ect and if he knows he has it for x amount of years he can plan ahead and run the place well, an easy way to help pick your client is go to his own place and see the way he runs it, hope this helps ya.

onyerbikepat

I suppose this is the difference between paper profit and real profit. If you are putting profits back into farm improvements, especially into those that will depreciate very slowly like slatted sheds etc, then to me that makes sense. You also have the added bonus of keeping down your tax bill. I suppose you really need two sets of accounts, one to show profit outside of investmets and the other for teh tax man.;) I have yet to meet someone that regrets making investments on their farm.

Sharpshooter82

loveta wrote: »

When i started out farming i put back nearly every penny into it again between quota reseeding drainage sheds and machinery worked stupid hours and took of farm work in the winter to help pay for farm "treats" quad, electric tools ect ect. I felt i was the effort that i needed to do on this farm to have it up and running the way it is today where i am making money and am happy at it the only problem now is i am being fu~king slaughtered with tax.... :0(

Now to the renting of the place this is a double edged sword, Are you farm proud or just in it for the money??
The reason i ask this is put it up for rent get a real good expensive price for it and the poor ejit that has it wont be long figuring out he is on a looser so he will try and suck the life out of the place to break even and wreck the joint in the doing so.

Now you could go the route of a lease to a say a dairy guy "better income" set up a plan "WITH" him what ya want eg % reseeded ect ect, dont want out wintering ect ect and if he knows he has it for x amount of years he can plan ahead and run the place well, an easy way to help pick your client is go to his own place and see the way he runs it, hope this helps ya.

have a chat with lakill..... that man knows his s**t on accounts and tax.

mahoney_j

Sharpshooter82 wrote: »

have a chat with lakill..... that man knows his s**t on accounts and tax.

Surprised u haven't looked into farming as a limited company,12.5% tax very appealing.many draw backs too but worth looking into

mahoney_j

Sharpshooter82 wrote: »

have a chat with lakill..... that man knows his s**t on accounts and tax.

Surprised u haven't looked into farming as a limited company,12.5% tax very appealing.many draw backs too but worth looking into

Sharpshooter82

mahoney_j wrote: »

Surprised u haven't looked into farming as a limited company,12.5% tax very appealing.many draw backs too but worth looking into

im useless at that craic but lakill are you listening :cool:...... where is that boy when you need him :rolleyes:

restive

I have a full time job and pay tax at the higher rate. Every euro i make out of farming is going to be taxed at the higher rate. I am not happy with it but their is very little i can do about it. I have not made a profit in the last three years as i have been putting it all back into the farm.

Joe the Plumber

Sure we all (part time farmers that is) are in the same boat.

Running farms at break even, I know you could say leave out the capital investment, but sure as long as there is farming there will always be a better tractor, shed, mower etc.

it's a hobby, like golf or football.

It keeps fellas out of the pub :-)

Sharpshooter82

Joe the Plumber wrote: »

Sure we all (part time farmers that is) are in the same boat.

Running farms at break even, I know you could say leave out the capital investment, but sure as long as there is farming there will always be a better tractor, shed, mower etc.

it's a hobby, like golf or football.

It keeps fellas out of the pub :-)

amen to that

Patrickheg

mahoney_j wrote: »

Surprised u haven't looked into farming as a limited company,12.5% tax very appealing.many draw backs too but worth looking into

Ltd company comes with lots of negatives such as compliance costs.

Also there is more to the 12.5% tax than you might think. You still have to take the money out of the company some way so you'll still pay income tax at your marginal rate whether it's a salary to yourself or a dividend. Also the revenue don't like companies building up cash piles so they hit you with a surcharge of 20% if you don't distribute your profits within a few years so you could say you are double taxed

Sharpshooter82

Patrickheg wrote: »

Ltd company comes with lots of negatives such as compliance costs.

Also there is more to the 12.5% tax than you might think. You still have to take the money out of the company some way so you'll still pay income tax at your marginal rate whether it's a salary to yourself or a dividend. Also the revenue don't like companies building up cash piles so they hit you with a surcharge of 20% if you don't distribute your profits within a few years so you could say you are double taxed

How's a man to get on in this country

locky76

onyerbikepat wrote: »

I suppose this is the difference between paper profit and real profit. If you are putting profits back into farm improvements, especially into those that will depreciate very slowly like slatted sheds etc, then to me that makes sense. You also have the added bonus of keeping down your tax bill. I suppose you really need two sets of accounts, one to show profit outside of investmets and the other for teh tax man.;) I have yet to meet someone that regrets making investments on their farm.

I would be similar, I'm trying to build up my output and have had to make a few investments both in stock and sheds/machinery etc. over the last few years, I've reviewed my accounts over the last few years and my output has really improved, the profits will start to improve also from next year on...
Also i like to run it at a loss every second or third year to allow me claim the tax back...

Farmer Pudsey

I never get caught up in profit and loss. I invest in assets that depreciate in real terms very slowly. Modern sheds will last 50ish years you deperciate over 8 I think it is faster if for envoirmental reasons. Some non mechanical machinery will last a long time rollers, chainharrows, sprayers, etc, etc. Tractors etc are the same however do not get caught up in spending huge amounts of money on them.

You can pay any of your childern a wage for the work they do on the farm they can use it to fund there college fees, accomodation etc. you can also invest in a pension remember we all need a bit of money when we retire, but beware of high cost high risk pensions. For instant standard PSRA have charges of 5% on contributions and 1% on managment fees not sure what other fees you pay, however if used wisely and especially as you near retirement(last 10 years before you retire) you can invest over one third of your earnings in a fund and recieve the marginal rate. If this is 42% it means that straight off you have a return of 60%. If you pick a low risk fund(I know you all think there is no such thing) such as government bonds etc while they may return only 2-5% you should at the end of 10 years have as much money as you put in before tax was deducted.

Now I hate giving anybody control of my money my own preference is that I could control it myself and put it into post office saving certficate within in a PRSA. But they are worth investigating.

However I have not got a tax issue at present.

locky76

Farmer Pudsey wrote: »

You can pay any of your childern a wage for the work they do on the farm they can use it to fund there college fees, accomodation etc.

What's the going rate for a three (and a half) year old young fella per day?
He's a dinger on the shovel work :-)

reilig

At the end of the day, it's only a loss on paper. Developing and building up an asset which will give an income for retirement or early retirement is just diverting your income to the future. Like some of the people above, I have an off farm job which pays reasonably well. Any profit on the farm is taxed at almost 50%.

In the simplest terms, I can choose whether to pay tax on profit or reinvest it and not have to give 50% of it to the government so that I can reap its benefits in the future - yes I'll have to pay tax on it, but if I'm not working off farm in the future, it may be at a low rate of tax. If I spend €10k on drainage and reseeding on the farm, it actually only costs me €5k in the long term. It improves my land and hopefully helps to bring me to a place where my land will give me an income and a profit when I don't have an off farm job.

Farmer Pudsey

locky76 wrote: »

What's the going rate for a three (and a half) year old young fella per day?
He's a dinger on the shovel work :-)

I think you cannot put them on the book's until they are four

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teen or fift

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eeeeen.