Importance of planning farm succession
Published January 8th, 2019
Succession planning can be tricky and on many farms is a subject put on the back burner to deal with at a later date. But it is never too early to have that conversation with the family about the future of the farming business as getting succession wrong could be costly and potentially devastating for family members.
Charlotte Rogerson at Berrys says succession is not about retirement, it’s a strategy. A long-term plan for the farming business its goals and how you plan to achieve them dealing with potential divorce and disputes and inevitable death and taxes.
Getting the conversation started is the first hurdle and the key is to involve everyone who might be affected, whether they are directly involved in the farm or not, as all family members need to express their needs and wishes. It may be worth bringing in an independent adviser if need be to listen and advise without getting emotionally involved.
Before you start you need to know who owns what on the farm and how any rental/tenancy agreements are set up as this will affect what you can and cannot pass on in the event of retirement or death. Any partnership or shareholder agreements should be robust and up to date.
Once the basis of land occupation and how this fits in with the farming operations has been established you need to consider how you can devolve assets in a tax efficient way to the next generation, for example through wills, lasting powers of attorney and trusts.
Tax is an essential consideration when succession planning. If the assets aren’t structured to take advantage of the available reliefs, then the farming business may not be able to continue after death.
Agricultural Property Relief and Business Property Relief can help to reduce or eliminate Inheritance Tax on farming and other qualifying business assets. Capital Gains Tax can be triggered when assets are given away but there are ways to reduce or delay this perhaps through trusts or Hold Over Relief. If assets are transferred to family members, remember to secure access rights, wayleaves, easements, etc before making any transfer.
You will need to consider which family members should benefit from the uplift in value of the land or property from any development.
Land at the edge of settlements will be particularly attractive for development and there may be opportunity to change the use of a building through Permitted Development without having to get full planning permission.
Farmers should also consider the use of Life Assurance or ensure there are adequate funds to ensure business continuity in the event of death of an owner.
Finally, ensure the time is right to handover the business. Equip your successors with relevant experience and skills well in advance and communicate your succession plan to all of those who may be involved including suppliers, buyers and the bank.
For more information on succession contact Charlotte Rogerson at the Shrewsbury office of Berrys on 01743 290642 or email firstname.lastname@example.org