How we can help you to ensure that your farm business thrives, now and in the future.
The chances are that generations of your family have worked on the farm. It’s only natural that you’re not going to want to gamble with the farms future. Knowing when and how to go about initiating a conversation about the future of the farm is difficult but why risk losing the very thing that your family is dependent on.
We understand that the issues involved in a farm business can be complex both in terms of the competing interests of family members who may or may not be involved in the business and in terms of the legal and tax matters that have to be carefully considered.
Working together as a team with any other trusted advisers you might have, such as your accountant or land agent, we can develop a plan to ensure that the farm business can continue to thrive both now and in the future.
Our approach to this is not transactional. Instead, the process involves taking into account a variety of factors and using a combination of our services, and those offered by other trusted advisers, in order to meet your goals.
This often involves:
- reviewing your legal, financial and business arrangements at regular intervals and at key stages in your life
- reviewing how the assets are currently owned
- considering the role that each family member currently plays in the business and is likely to play in the future
- considering how best to provide for those who will not be actively involved in the business
- reviewing and updating Will and Trust arrangements
- discussing a framework for passing on assets safely and the use of Pre-nuptial Agreements
- considering the steps that can be taken to maximise available tax reliefs and exemptions including the suitability of pensions
- reviewing and updating Powers of Attorney for your business affairs and in connection with your personal property and financial affairs
- reviewing and updating Partnership Agreements and distinguishing personal assets from partnership property
- considering the appropriateness of key person insurance for your farm business
- working collaboratively with accountants, land agents and other rural business advisers.
We know that no two farming businesses are the same so we can develop a plan tailored to meet your goals to ensure that the farm is protected for your family’s future.
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If you are not yet ready to talk, keep scrolling to read our FAQs about Families in Farming.
FAQs about Farming Business Succession.
The following assets will generally qualify for APR:
- agricultural land or pasture which includes woodland and any buildings used in the intensive rearing of livestock or fish, if the woodland or building is occupied with agricultural land or pasture, and the occupation is ancillary to that of the agricultural land or pasture; and
- cottages and farm buildings which together with the land they occupy, are of a character appropriate to the agricultural land or pasture.
The land and buildings referred to above must be occupied for agricultural purposes and must have been occupied for such purposes throughout a period of two years if the owner is in occupation or seven years if a third part is occupying it (i.e. it is let out).
Finally, the assets must not be subject to a binding contract for sale.
A careful review is required to determine this as it depends on a variety of factors including:
- is the house appropriate by reference to its size, content and layout, for the farm buildings and particular land being farmed?
- is it proportionate in size and nature to the requirements of the farming activities conducted on the land?
- does it meet the ‘elephant test’? Although it is difficult to describe a farmhouse, you know one when you see one.
- would the average rural person describe the property as a house with land or as a farm, i.e. land with a house?
- is there a historical connection with the land in question and has there been a history of agricultural production?
If the farmhouse qualifies for APR, it is important to remember that this is unlikely to cover the full market value of the property. Typically, about 70% of its open market value will represent its agricultural value. This is usually a point of negotiation with HMRC. If the house is subject to an agricultural tie, that would suggest that APR should cover the entire amount of its open market value.
It’s also important to note that provided that the farmhouse is occupied in common with the land being farmed an APR claim can still be made even if the legal ownership of the farmhouse and land have been separated.
There are two rates of APR: 100% and 50%.
Most qualifying assets are entitled to relief at the 100% rate but land let under an old Agricultural Holdings Act tenancy will be limited to the 50% rate of relief.
Despite qualifying for APR at 100% this won’t mean that the entire value of the asset will always pass free of IHT. This is because APR only covers the basic agricultural value. It therefore won’t fully exempt residential buildings, farm buildings not in use for agriculutural purposes nor land and buildings with development value or hope value.
Assets that qualify for BPR are entitled to relied at a rate of 100% or 50%.
The following assets are entitled to BPR at the 100% rate:
- Businesses e.g. a business carried on by a farmer as a sole farmer;
- Interest in a business e.g. a share in a farming partnership; and
- Unquoted shares which give control of the company.
The following assets are entitled to BPR at the 50% rate:
- Quoted shares which give control of the company;
- Land, buildings, machinery or plant used wholly or mainly for the purposes of a business carried on by a company controlled by the transferor/deceased or by a partnership in which the transferor/deceased was a partner; and
- Land, buildings, machinery or plant in which the transferor/deceased had an interest in possession and used wholly or mainly for the purposes of a business carried on by the transferor/deceased.
This will cause uncertainty about what is and what isn’t owned by the partnership as opposed to what’s owned by individual partners but used by the partnership. This uncertainty can lead to disputes. In addition, HRMC are likely to challenge a claim for BPR so you could end up paying a substantial amount of unnecessary tax.
If there isn’t a written Partnership Agreement, the entire partnership will be dissolved on the death of one of the partners. The deceased’s partner’s share is treated as a debt due from the surviving partners. This will have serious implications for the continuity of the business.