“Introducing an additional income stream can mean the difference between success or failure for some farmers,”Says Alistair Millar, a director of a partner company at Tallents in Southwell.
“Releasing unused resources, such as land or buildings, can create alternative sources of much needed income for today’s farmers. ”Diversification is not for the faint hearted though. Farmers are already used to hard work and long hours but Alistair believes the key to success is a balanced mix of enthusiasm, realism and accessing the right professional expertise.
“A project will often take a farmer outside their current knowledge and skill levels, therefore additional training and professional help are often important and a good financial investment.
“The key is to plan all aspects in great detail and then ensure every part of the plan is examined in detail by family, business partners, staff and professionals alike.”Tenant farmers additionally face a range of specific issues as their tenancy agreement may not allow certain kinds of diversification activity because this may have an impact on tax and inheritance implications for the landowner. Alistair comments,
“However, the Farm Business Tenancy does allow more flexibility for tenant farmers wishing to diversify their activities and it may be possible to facilitate an agreement with the landowner that will allow the tenant farmer to progress their business projects without unduly impacting the landowner.”Alistair continues,
“One area that is continually overlooked is how the additional business and subsequent income affects inheritance tax. This area is complex and an experienced agricultural lawyer will be able to advise whether full relief, from a business property relief point of view, is possible or not.”It’s also important to consider how the businesses are set up as this will also affect the level of relief available. Alistair finishes,
“It may be sensible to separate certain businesses to ensure relief can be applied in full to the main business and it is sensible to carry out a thorough review of land and farming assets and how they are used to identify the best approach. Time spent with an agricultural lawyer at an early stage in the process could save thousands of pounds in the future.”