Farming News - Succession planning when there’s no-one to take on the farm
Succession planning when there’s no-one to take on the farm
On retirement, more and more farmers are finding there is no-one to take on the farm, leaving them to have to make decisions on how they will provide for themselves, while considering those benefitting from their estate.
Jenny Layton Mills, partner at McCartneys, explains there are four options for farmers in this situation.
“If you want to make clean break, selling the farm can be a good option. But be aware that in this situation you’d be subject to capital gains tax and it will also increase inheritance tax, so it’s important to factor this into your decision,” she says.
“If this is your favoured option, start by getting the house and land valued, and decide whether to sell by auction, tender or private treaty. I would advise speaking to a land agent about any development opportunities prior to selling to help increase the value of the property.
“The second option is letting the farm as a whole” she says. “This is perfect for those who want to avoid inheritance tax and don’t want to part with the farm just yet.
“One of the drawbacks of this route is that it does require having capital to reinvest in a property for you to live in, but the tenancy could provide a good income to help support retirement.
“It’s advisable to put the farm out to tender to test the market and choose the right person to take on the farm. Once you have the right person lined up, set up a farm business tenancy agreement,” says Jenny.
Share or contract farming can work for people who want to remain in the farmhouse but are not able to work full time on the farm, yet still want to be involved.
“In this situation it’s really important to make sure that agreements are set up correctly to protect the agricultural property relief,” she says.
“You need to demonstrate that you’re still involved in farming activities or decisions. For example, set up regular meetings with contractors to discuss the cropping options,” she adds.
The final option is to stay in the farmhouse and let the land out on cropping or grazing licences.
“These licences need to be set up with your land agent to ensure both parties are aware of their obligations,” says Jenny.
“The farmer needs to demonstrate that they’re spending money on the land, not just merely letting it, otherwise you could risk losing the agricultural property relief.
“This means maintaining the land, for example fertilising, providing for boundaries. The work can be carried out by a contractor, but you must pay for it and provide receipts for proof,” she says.
“Ultimately everyone’s situation is completely different, which is why it’s important to talk things through early and seek the right advice from qualified professionals as soon as possible, to ensure you’re making the right decision for your circumstances,” concludes Jenny.