Will agriculture end this year on a high note?

Published: 1 Nov 2012 13:000 comments

The significant price increase notched up at United Dairy Farmers' October milk auction is a genuine good news story for agriculture as a whole.

Seamus McCaffrey, originally from Irvinestown, now an accountant in Omagh.

For one thing, it signals that the markets are, at last, responding to the cost increases that have been impacting on every local farm, stretching back for the past two years and more. But one swallow doesn't make a summer. So let's hope that we will see more of the same across all the commodity sectors in the months ahead.

Every viable business must be allowed make a profit. And in this regard, farming is no different to all the other commercial sectors that contribute to the economy as a whole. However, the needs of agriculture cannot and must never be compared directly to those of the service and manufacturing sectors. For example, no other industry is as dependent on mother nature as is farming. Moreover, livestock production is all about long term planning.

It takes at least three years from the point of her inception to bring a replacement heifer through to the stage when she can join a milking herd. And, of course, farming is a 24: 7 career option. Animals need fed and managed every day of the year. These are real facts that consumers should ponder more often as they navigate the aisles of their local supermarket.

Thankfully, beef prices are also on the rise. This had been expected, given the large numbers of cattle killed during the late summer and early autumn. Last week also saw the Department of Finance putting out to tender the contract, the terms of which have been drawn up to allow the LMC identify the reasons why there is such a disparity in deadweight cattle prices between Northern Ireland and many other regions of the UK.

It goes without saying that this work must be completed as quickly as possible. Local farmers want answers now to this more than vexing issue. It has been estimated that the current beef pricing structures are penalising beef finishers in Northern Ireland to the tune of £10 million per month. This is a truly ridiculous situation, particularly given the fast increasing costs of feed and forage now confronting every livestock farming enterprise in this part of the world.

The UK came out of recession - officially - last week. This is, undoubtedly, good news for the economy as a whole. So let's hope that the breakthrough achieved at the October milk auction is a portent of better times to come for agriculture in Fermanagh.

November is now with us and it's a month during which many farmers' minds turn to the thorny issue of conacre. Revenue and Customs is now increasingly challenging claims for Agricultural Property Relief (APR) against the value of agricultural land and farmhouses.

Legislation and Revenue practice specify that, in order to obtain APR at 100%, the farmer must have vacant possession within 24 months, otherwise the relief will be restricted to 50%. In addition, the land and the farmhouse must be occupied for the purposes of agriculture.

The challenge from the Revenue is particularly strong where there has been an operational change in the farm business in the last few years prior to the gifting of the land/farmhouse or just before the death of the farmer.

The operational change may come about for a variety of reasons: lifestyle; health; succession planning. Where a change has taken place, the Revenue will look, in depth, at the evidence to see if the property is occupied for the purpose of agriculture. The evidence considered will be any written agreements in place, bank statements, cheque stubbs.

Where a person lets his land in conacre and cannot produce evidence of his having a high level of activity on the farm, the Revenue will, more than likely, deny a claim to APR. A low level of activity, eg. Cutting hedges, cleaning drains and basic repairs are merely managing an investment and do not meet the test of occupying the property for the purposes of agriculture.

A low level of activity by the farmer will be used by the Revenue to prove that the farmer has surrendered his right of occupancy over the land and, accordingly, deprive him of APR.

In view of the increasing focus of the Revenue on APR, where a farmer is making operational changes, and wishes to obtain APR, then it is necessary to look at safer alternatives to traditional conacre. For an alternative arrangement to be successful against a Revenue challenge, the farmer must be able to produce evidence of a consistent level of activity annually. A record of a series of transactions between the farmer and the other party may be effective eg. the farmer may grow the grass and sell the standing crop; the farmer may grow the grass, make silage and sell the silage; or provide a livestock bed and breakfast business. Where possible, the farmer should use his own machinery; if he has sold his machinery, a contractor may be used. To further protect his claim to APR, the farmer should retain responsibility for cross-compliance obligations for the purpose of the Single Farm Payment.

A further possible alternative to traditional conacre is some form of collaborative arrangement, for example, share farming. This alternative to conacre would involve sharing risk, joint working, pooling of expertise and mixing enthusiasm with expertise as well as, possible, reducing farm fragmentation.

The most fundamental point in relation to a claim for APR concerns whether the farmer is taking risk or merely managing an investment. Decisions in recent tax cases have ruled that letting land on a traditional conacre basis is merely managing an investment, not running a business and, accordingly, claims to APR are in doubt.

However, where there is evidence that the farmer is taking risk, and evidence of his having a high level of activity on the farm, he will have a greater chance of obtaining APR. There is a lot which the farmer can do to protect his claim to APR.

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