Business Clinic: Succession prompts decisions on farmland

Whether it’s a legal, tax, insurance, management or land issue, Farmers Weekly’s Business Clinic experts can help.

Here Edward Beale, associate partner with Carter Jonas, advises on a question of family succession and farmland assets.

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Q: We have been running a successful farming business in the Midlands for many years and are in a gradual transition to the next generation, which is keen to focus more time on the diversification businesses rather than the farming. Can you advise on how we can manage this, including how to tackle the decision around letting or selling the land that is currently farmed?

A: The industry has been highlighting the importance of succession planning for the past 10-15 years, and that’s really starting to pay off now. It is enabling the younger generation to come into farming while they still have the passion to do so.

Without that, young people typically lose interest and explore different things, and once they are away from the family farm and building their own life, it can be very difficult to come back.

My advice is always to give someone keen and willing the faith and space they need to explore their own opportunities on the farm.

First, I would advise setting up a meeting with your business’s three key advisers: your solicitor, accountant and land agent. Having an open conversation is difficult but essential.

However, if approached in the right way, it can also be an exciting conversation; the older generation have probably already accepted that they need to wind down a little and have faith in the next generation.

Once these conversations have begun, I encourage clients to commit to either a five- or 10-year plan setting out targets they want to try and achieve.

Years one to five might be a slow transition where the older generation move out of the family home to allow the younger generation to move in, or transferring assets across within the tax regimes available to them in order to avoid large tax bills breaking up the family farm.

The earlier you can do that, the better, because we all need assets in our 20s and 30s – by the time you get to your 50s and 60s, you don’t always need the leg up. So the conversation needs to happen sooner rather than later.

Selling land

When it comes to the option of selling the land, remember you can only sell it once, so you need to make sure you secure the very best value from it.

Explore your options – select a firm that has wide experience and a range of specialist teams who can carry out a full appraisal to explore all the possible options.

There may be structures or markets that you have not thought about, but it will be important in weighing up this option to consider how the diversified enterprises might develop in future and how the use by any purchaser might affect this.

There is a range of options for letting the land. Different people are entering the market now, for reasons including biodiversity net gain and carbon capture. 

Letting farmland is probably the simplest option if the younger generation don’t want to be hands-on with the farming side of the business.

There is also the option of a contract farming agreement, where you retain all the management control. That has tax advantages under the current regime, but you would still need to be involved in the business.

However, it is also worth considering another option where you would continue to farm but with less day-to-day involvement, such as share farming, which could give the opportunity to a new entrant or a younger farmer who wants to expand.

Alternatively, you could bring in someone to manage the farming side of the business. This could be on a service basis, so would not mean having to employ a full-time manager. 

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