Outside blocks

Jack98 · 15-11-2023 10:54pm

I’ll just try answer ye all in one response.

We have 40 acres of an outfarm 30km away that could be offloaded to cover the purchase but it’s not something I’d be really for maybe a portion of it perhaps to cover some amount.

We currently milk around 110 cows on 96ac milking platform of which 82 is owned. So even if you got the lot without rented land amount of cows you could milk would never be crazy high numbers.

Wed be able to come up with a deposit of 100k already roughly.

We are looking at entering a limited company next year as I currently have off farm income of 45k + bonuses which could be left outside the company and the company would allow more cash in the farm to be freed up to make repayments as we had huge tax bills last two years and would prefer to put that money to work instead.

Id be happy enough to just buy our 6ha even though the lot would be great as I only see myself full time farming in the future but as @jaymala said it’s a huge undertaking and a big outlay in current conditions of farming.

Bass Reeves · 15-11-2023 11:15pm

https://www.boards.ie/discussion/comment/121373238#Comment_121373238

Is @Jack98 working I think he said previously he was working. Even if not if he is married and his spouse is working it changes the draw down necessity. He probably has capital allowances so he can use these to defray drawdown. Interest rates may not always be 6%. The land is going to help with income from it as well.

As @Grueller said he has an outblock further away he can sell. If he has little necessity for other drawdowns. However a company is the most efficient form however it something I think is hilarious. Farmers use a company to defray the tax use the extra cash within the company to pay more for land ( IMO company formats have added 40-70% to land prices) and at the end of the day if you want to take the land out of the company you pay way more in tax again on an inflated land prices

If everyone had to buy Agri land outside company formats we would all be as well off

Jack98 · 15-11-2023 11:24pm

https://www.boards.ie/discussion/comment/121373477#Comment_121373477

If I’m going full time farming in the next 10 years do you not think a limited company would not be the best route to go anyway to keep external income which I mentioned in my previous comment I have outside of the company and the land will be in the company for 30+ years anyway does it not make more sense to minimize the liability of a substantial repayments each year for the purchase of land in your opinion?

Bass Reeves · 15-11-2023 11:36pm

https://www.boards.ie/discussion/comment/121373513#Comment_121373513

I agree that a company setup is the best to protect yourself from income tax.

However it becoming a monster on land prices. Lads are driving the price of land because they are buying the land out of gross income( taxed at 12.5%). But it's a false economy as the land is within a company structure in reality it not really yours. It will make it hard to split land banks down the line.

Pinsnbushings · 15-11-2023 11:47pm

https://www.boards.ie/discussion/comment/121373406#Comment_121373406

Out of curiosity why would you not sell the land 30 km away to buy the whole lot? It seems a no brainer to me..I have land 15 km away and I'm 10 years trying to get land beside me instead..

Unless you feel the the land further away has some sort of development potential or is vastly better quality or something?

Jack98 · 15-11-2023 11:54pm

https://www.boards.ie/discussion/comment/121373579#Comment_121373579

It is in two parts 26 acres with development potential and 14 acres up the road, land in that area is making 15-20k an acre whereas the place bounding us will be all out to make 12k but decent land too. I’d consider selling the 14 acres convincing the parents would be the issue I reckon as it’s my mothers home place and sentimental value etc

Pinsnbushings · 16-11-2023 12:03am

https://www.boards.ie/discussion/comment/121373607#Comment_121373607

That's what I suspected with the development..with regard to the sentimental aspect, while understandable, my father missed out on several pieces of land locally..because he wouldn't sell the land away as when it was left to him he was told "I know you won't sell it" !!

It was nonsense, generations before us were much more mobile and willing to move or adapt to improve there lot..

Bass Reeves · 16-11-2023 12:10am

https://www.boards.ie/discussion/comment/121373607#Comment_121373607

If it's decent land make no presumptuous on what it will make. Lately other side of Limerick a block of land with a ROW through another farm with two gates to go through went to that money. Two dairy farmers got stuck in each other. AFAIK it was going through one of there farms and the other lad bounds it. No development potential not even site potential.

If there is two lads where they are incorporated 12-14k seems to be the same as 7-9k

Mooooo · 16-11-2023 3:01am

Are facilities good on the farm? Much existing debt? Siblings/ family to see after? All things to take into account.

If working as well and you aim to go full-time in 10 years and price may be at the 12k an acre bracket tbh I think you should go for it. It's now when you're young and there is still the bit of help at home to get thru the initial burst. The first years of the loan repayments will have higher proportion of interest which can be written off, as it progresses the tax side of it comes more into play. With that and outfarm 130 cows would be comfortable in middle band under 220kgs N/ha.

Was making those sorts of repayments with no other income or help on farm with similar numbers and it was tight for a bit but your situation should be a bit better

As I said talk to the accountant and/or advisors or whoever put a few plans on paper and see where ye stand. Yer own decision at the the end of the day as everones situation is different but that's my tuppence worth.

Jack98 · 16-11-2023 8:56am

https://www.boards.ie/discussion/comment/121373923#Comment_121373923

Yard is fairly well see have 120 cubicles in home yard and finished tank for collecting yard lately which with existing tanks would have us having excess slurry storage for current numbers and comfortable for 130+ cows, 10 unit parlour that wouldn’t take much investment to extend to 14 also.

I have one brother who is in final year engineering in UCC who has already been offered a job in cork where he done placement after he graduates, he wouldn’t be as inclined to go milking but outfarm with development potential would have to be left for him to be fair to him.

Must get onto our advisor and see if it would be viable if working for another 10 years could make a nice dent in possible repayments and give a chance to free up some bit more money on farm for some investment to have farm well setup for when parents wind down and I’d go home full time.

straight · 16-11-2023 11:06am

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 · 16-11-2023 11:32am

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 · 16-11-2023 1:16pm

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 · 16-11-2023 1:44pm

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 · 16-11-2023 2:24pm

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 · 16-11-2023 2:34pm

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 · 16-11-2023 2:46pm

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 · 16-11-2023 3:20pm

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

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

Jack98 · 16-11-2023 3:21pm

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 · 16-11-2023 3:22pm

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

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

straight · 16-11-2023 3:57pm

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 · 16-11-2023 5:28pm

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

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

GrasstoMilk · 16-11-2023 5:33pm

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 · 16-11-2023 5:40pm

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 · 16-11-2023 5:59pm

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 · 16-11-2023 8:14pm

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