A challenging outlook raises many questions about the future of farm businesses.
We asked our expert partners in the Farmers Weekly Business Clinic give their advice on the big issues that farmers will be wrestling with this year.
Conversion of farm buildings
There are many issues around the new planning rules on conversion, including time limits. Make sure you check the latest government guidance.
Renewable energy opportunities
What opportunities are there for farmers in this sector? The full ramifications of a project need to be weighed up – from getting the planning right, to deciding who you should work with, how to get the right contract terms, considering the tax impact and structuring the new enterprise.
Avoid succession disputes
Cases like the “cowshed Cinderella” story, which made national news headlines a few months ago, are not uncommon in farming. Carefully consider both the family and tax issues of any succession plan.
Manage finances through volatile times
This will require skills that were not necessarily needed in times of greater price stability.
The relationship between turnover, profit and cash now needs to be more proactively managed to ensure that times of lower prices can be survived and times of higher prices are used to best effect.
Minimise the tax burden
It is just as important to reduce tax as it is any other cost, leaving more retained profit in the business for reinvestment and progression. Often there are many options to achieve this without restricting what the business or its owners are able to do.
Keep wealth in the family
Most farm businesses have a substantial asset base of land and property which most generations would like to see as their right to earn a living from and also their responsibility to leave in a better state than when they took it on.
Achieving this requires careful management, typically including a thorough understanding of the family’s objectives and a proactive approach to opportunities – all implemented with the right capital tax and pension planning advice to keep as much wealth in the family as possible.
There is a strong land market at the moment, which could well get stronger.
But despite a struggling commodity market and the gulf between the earning capacity of land and its value there are plenty of drivers to hold on to land, in particular the tax efficiencies it currently provides.
Farmers struggling with marginal enterprises should think carefully how to structure the business before making any disposals.
For many, volatility in the global commodity market and deflation in food prices may have come as a bit of a reality check.
Farmers need to find ways to de-risk production by focusing on costs and having a clear understanding of the markets they are selling into.
Risk of an EU exit
The referendum on Europe is a huge political uncertainty and with farming getting a pretty good deal from EU membership there is a lot at stake.
An exit from Europe and a government looking to further cut public spending would make it hard to justify the £3bn subsidy bill.
With low commodity prices many businesses will currently be underpinned by subsidy. In the event of an exit, those businesses will have to think hard about how they continue with what could be reduced levels of support.
Plan farm succession
Lack of a long-term vision and a pension plan for the current farmer limit opportunities to invest for the future, putting the future viability of family farms at risk.
However, in today’s highly competitive global market, family farms which don’t have a clear succession plan and a long-term future mapped out risk falling behind and becoming financially unviable. In 2015, families will need to start talking about succession.
Develop your business profitably
A very profitable business may not succeed if cash is not generated at the right times.
It will be important to know how to correctly assess existing enterprises and/or appraise opportunities such as anaerobic digestion or poultry.
To successfully manage the business, the right systems will be needed for generating information – for example on cashflow.
Give thought to business structure
A partnership, company or trusts can be used to safeguard assets and develop business in a tax-efficient way. This is particularly important where a business is expanding.
Do you have a question for the panel?
Outline your legal, tax, finance, insurance or farm management question in no more than 350 words and Farmers Weekly will put it to a member of the panel. Please give as much information as possible.
Send your enquiry to Business Clinic, Farmers Weekly, RBI, Quadrant House, The Quadrant, Sutton, Surrey SM2 5AS.