We are continuing our 200-year anniversary celebrations with random acts of kindness in...
Succession: how to keep it in the family for generations
Over the last 200 years, agriculture in Britain has changed significantly. With the impending changes following Brexit, The Agriculture Act 2020, and no doubt many things we do not even know or have heard of as I write, it will undoubtedly change and need to change to survive the next 200 years.
For farming families, the business structure is one of the most important plans they should have in place to help keep the longevity of the business on-going. We can help make sure your farming family has everything in place.
How succession has changed over the years
Historically, succession was never really discussed; it was expected that the eldest son would merely carry on his ancestor’s legacy. Times have changed. Expectations have changed.
No longer is it the eldest son who wishes to take on the farm and all responsibilities, in fact, his younger siblings, be it male or female, often want to be involved and part of the future of the farm.
There is the added complication that land values are significantly higher. The expectation of running the farm used to be seen as a burden, there is concern amongst many farming families of the benefits that may be lost if they do not appear to be part of the farming structure. This concern is often by parents who are trying to ensure that the farming business will continue, whilst balancing equality amongst all the children.
Those younger generations who feel they are entitled to have an expectation can often feel aggrieved if plans are not put in place, or they feel that such plans are inequitable. The courts are continuously hearing, and having to decide on, complex cases trying to sustain a business whilst ensuring each party has been fairly provided for. Failure to plan, and more importantly to discuss and agree, the way forward with each member of the family can be a costly mistake.
Divorce in farming families
Divorce is also an issue. The forward-thinking farmers that have passed the farm down to the next generation, can then be placed in a precarious position if their son or daughter later divorces and advice has not been sought or proper provisions have been put in place.
Taxation and farming
In addition to the issues surrounding succession, come taxation problems. Land values have increased exponentially quicker than inheritance tax thresholds.
HMRC is being increasingly rigorous in its investigations surrounding the availability of agricultural property relief and business property relief. They look closely at diversification and the balance of those dirty diversified activities as opposed to traditional farming activities.
They are also increasingly looking at whether the quote “older farmer” is actually farming; whether their health has actually permitted them to remain as a farmer in the last years of their life. Failure to consider succession and to put plans in place can be an expensive mistake.
Strategic land development
Strategic land development, as everyone is aware, has been on the increase and unsurprisingly farmland is often subject to such developments converting inheritance tax efficient farmland to tax inefficient cash.
This does offer opportunities for farming families who wish to farm, notwithstanding disposing of some land for development, enabling the future generations to be fairly provided for, balancing the interests of those that wish to continue to farm and those that do not.
It has been widely publicised that there are extensive changes to farming on the horizon. From the way the farming activities are carried out, the balance of growing crops and breeding livestock, diversification and protecting the environment as well as restructuring of the taxation system. We will try to keep up with these changes and give as much information and guidance.
Farming families must ensure that their business structure, the older generation and the future generations, are all thinking about the longevity of the business early, considering aspirations, expectations, and realistic objectives.
To discuss anything within my article above, please contact me on firstname.lastname@example.org