Pros and cons of setting your farm up as a company?

NovemberJersey

Is there much to gain if you set up your farm as a company? Is there much you can actually do with the money that the company makes? How big of a scale would you want to be on for it to be worthwhile? Any feedback would be great

Mooooo

There must be fierce money in these crossbreds ha. On a serious note your accountant is rhe one to talk to. Scale is probably the least of the issues

Jexbullcalf

NovemberJersey wrote: »

Is there much to gain if you set up your farm as a company? Is there much you can actually do with the money that the company makes? How big of a scale would you want to be on for it to be worthwhile? Any feedback would be great

Do you have a big tax bill? Are you running out of capital allowances? Same boat here was thinking of it but after talking to the accountant have decided against it.

NovemberJersey

Jexbullcalf wrote: »

Do you have a big tax bill? Are you running out of capital allowances? Same boat here was thinking of it but after talking to the accountant have decided against it.

Ya the sizeable tax bill is what I'm trying to curb with the setting up of a company. I know it's hard to take money out of the company afterwards but I'd rather my company have the money instead of giving it away to the tax man… is buying land out of the company's money a no go due to the problem of handing it on afterwards do you know?

NovemberJersey

Mooooo wrote: »

There must be fierce money in these crossbreds ha. On a serious note your accountant is rhe one to talk to. Scale is probably the least of the issues

Ya I've to talk to the accountant about it but thought I'd pick yer brains about the idea, if there was any major issues with setting up a company that I found out about here it would really put me off it

Keepgrowing

Are you guys considering incorporating just to avoid tax. That should be a consideration but not the only one. You are transferring assets to another entity and the income they generate stay there. The company isn't you nor are you the company. It is a "person" in its own right.

You'll face delays with the transfer or entitlements and subsequent payment.

With the greatest respect this is not the place for that advice. Think about your future needs and sucession then visit a very good accountant not just a guy who says he is.

Best of luck

NovemberJersey

Keepgrowing wrote: »

Are you guys considering incorporating just to avoid tax. That should be a consideration but not the only one. You are transferring assets to another entity and the income they generate stay there. The company isn't you nor are you the company. It is a "person" in its own right.

You'll face delays with the transfer or entitlements and subsequent payment.

With the greatest respect this is not the place for that advice. Think about your future needs and sucession then visit a very good accountant not just a guy who says he is.

Best of luck

Avoiding tax is the big issue, I know that I'd have to transfer the cattle into the company and apparently the machinery aswell… I know I'll have to go through it thoroughly with the accountant but I thought after talking on this about it maybe I'd have fruit for thought, I'd have more questions to ask him then about it all

Buford T. Justice XIX

One con (or pro) of being in a company is having to do quarterly accounts, iirc. So your accountancy fees area lot larger for the same business level as self employed person.

duffysfarm

there is no requirement whatsoever to do quarterly accounts if you have a limited company. Has your account told you this?

Buford T. Justice V wrote: »

One con (or pro) of being in a company is having to do quarterly accounts, iirc. So your accountancy fees area lot larger for the same business level as self employed person.

Buford T. Justice XIX

duffysfarm wrote: »

there is no requirement whatsoever to do quarterly accounts if you have a limited company. Has your account told you this?

No, it came up in a discussion group meeting earlier this week and I had heard the same before that as well.

So normal yearly accounts are all that's needed?

blindside88

If the main purpose is to avoid/reduce tax have you considered putting money into a pension instead? I'm not a farmer myself (I have family involved in farming). I'm a financial advisor and a lot of my customers are farmers. I place large lump sums into pensions for them to reduce their tax bills and put money away for the future. If you haven't done so already I would speak to a financial advisor in relation to this

duffysfarm

for a limited company you will have to prepare a set of annual accounts so yes, only once a year. It may be best practice to prepare quarterly accounts but you have to look at the cost benefit of doing this. If you have been farming for some time as a sole trader and have only been preparing accounts once a year then and getting by with this then a limited company will be no different

Buford T. Justice V wrote: »

No, it came up in a discussion group meeting earlier this week and I had heard the same before that as well.

So normal yearly accounts are all that's needed?

NovemberJersey

blindside88 wrote: »

If the main purpose is to avoid/reduce tax have you considered putting money into a pension instead? I'm not a farmer myself (I have family involved in farming). I'm a financial advisor and a lot of my customers are farmers. I place large lump sums into pensions for them to reduce their tax bills and put money away for the future. If you haven't done so already I would speak to a financial advisor in relation to this

On a low risk pension fund could you tell me what approximately the yield would be? I was talking to someone today about the good tax relief you get from putting money into a pension fund but my way of looking at it is if I put let's say for example €20,000 a year into a pension fund what will that money be worth in 20 years time, it probably wouldn't be worth a whole pile in comparison to what it's worth today.

The main thing that I'm apprehensive about setting up a company over is when I would have a nice bit of money sitting in the company's bank accounts is there much that I could actually do with it?

My next question is probably a stupid one but theoretically could I borrow money off my own company and spend it on whatever (I presume I wouldn't have to pay tax on the money if it was supposedly a loan) I'd want and then just decide to not pay it back?

Keepgrowing

Buford T. Justice V wrote: »

One con (or pro) of being in a company is having to do quarterly accounts, iirc. So your accountancy fees area lot larger for the same business level as self employed person.

Well yes, if you're a PLC.

Timmaay

NovemberJersey wrote: »

On a low risk pension fund could you tell me what approximately the yield would be? I was talking to someone today about the good tax relief you get from putting money into a pension fund but my way of looking at it is if I put let's say for example €20,000 a year into a pension fund what will that money be worth in 20 years time, it probably wouldn't be worth a whole pile in comparison to what it's worth today.

The main thing that I'm apprehensive about setting up a company over is when I would have a nice bit of money sitting in the company's bank accounts is there much that I could actually do with it?

My next question is probably a stupid one but theoretically could I borrow money off my own company and spend it on whatever (I presume I wouldn't have to pay tax on the money if it was supposedly a loan) I'd want and then just decide to not pay it back?

Another pension question here, are you not only shifting taxation to when you are drawing down the pension? I know my dad's pension is adding a decent bit onto the tax bill here now as what he is drawing down is considered income, and pushing him onto the top rate regularly.

blindside88

NovemberJersey wrote: »

On a low risk pension fund could you tell me what approximately the yield would be? I was talking to someone today about the good tax relief you get from putting money into a pension fund but my way of looking at it is if I put let's say for example €20,000 a year into a pension fund what will that money be worth in 20 years time, it probably wouldn't be worth a whole pile in comparison to what it's worth today.

The main thing that I'm apprehensive about setting up a company over is when I would have a nice bit of money sitting in the company's bank accounts is there much that I could actually do with it?

My next question is probably a stupid one but theoretically could I borrow money off my own company and spend it on whatever (I presume I wouldn't have to pay tax on the money if it was supposedly a loan) I'd want and then just decide to not pay it back?

You would want the pension to be performing at 3% per annum to keep pace with inflation (generally speaking). Therefore being equal to the spending power of €20,000 today

blindside88

Timmaay wrote: »

Another pension question here, are you not only shifting taxation to when you are drawing down the pension? I know my dad's pension is adding a decent bit onto the tax bill here now as what he is drawing down is considered income, and pushing him onto the top rate regularly.

That depends on when you draw down to be honest. If you are still drawing an income from the farm when drawing the pension it can have tax implications. The ideal scenario is to draw it after you hbe passed the farm to the next generation. From a tax point of view there are 3 big advantages to the pension.
1) your preliminary tax for next year is based on the tax you paid this year, therefore by reducing this years tax bill you also reduce your preliminary tax bill
2) you benefit from gross roll up in your pension. Meaning that you only pay tax at the end while drawing down and are not paying tax as the money grows each year.
3) depending on how you draw your pension you can avail of up to 25% of your pension pot as a tax free lump sum at retirement (within certain limits)

Also if you pay tax at the 40% rate you can get tax relief on contributions at this rate (meaning for every €100 contribution the tax man pays €40 of it). When most people draw on there pension they only pay tax on it at the 20% rate and save that way also. But as in your dads case of there is other income it can push you into the higher bracket

Buford T. Justice XIX

I'm including a link to the Farm Indo today for some advise on extracting money from a company structure.

http://www.independent.ie/business/farming/schemes/would-having-a-limited-status-benefit-your-farm-35099838.html

lakill Farm

The annual accounts for a limited company must be filed with the CRO on or before ARD date or you lose your audit exemption and a late filing fee is applicable

This "ARD" date is normally based on the date the company is formed but can be changed.

Rp09491

I'm currently getting the farm transferred to myself. Myself and my wife are currently paying 40% tax on ur income already. One of the criteria is the farm has to be farmed for 7 years by me. Will I still qualify for the agricultural relief if I go straight into a limited company.

lakill Farm

Rp09491 wrote: »

I'm currently getting the farm transferred to myself. Myself and my wife are currently paying 40% tax on ur income already. One of the criteria is the farm has to be farmed for 7 years by me. Will I still qualify for the agricultural relief if I go straight into a limited company.

Before you set up a Ltd company look at section 381 and 392 of finance act. Offset of farm loss and unused capital allowance against Paye.

You really need to sit down or even call an accountant and come up with a tax plan