Business Clinic: BPS top-up may help succession plans

Farmers Weekly’s business expert Ashley Lilley gives advice on succession.

Q: I am the head of a family farming business and my children are already actively involved. Should I push forward with succession planning to take advantage of the BPS young farmer top-up payment?

The Basic Payment Scheme includes a top-up payment for farmers under 40 who hold a majority share (51% or more) in a farming business.

The top-up payment is equivalent to 25% of the value of entitlements up to a maximum of 90ha and is available for five claim years from 2015.

So it is worth just over £4,000 a year, which is useful extra cash, but for many will not be enough to drive some of the big decisions about ownership of the business which may be needed to secure it.

Ashley Lilley
Director of agribusiness
Savills

However, as in this case, it may help to push forward succession plans that have been in the background for some time.

See also:10 steps to a successful BPS claim

Much has been written on succession for farm businesses, and unfortunately there is no one-size-fits-all policy. I recommend you consider three key questions before making any concrete decisions:

1) Is there sufficient cashflow and profit to support those who require an income from the business? In most cases your generation will continue to rely on the business for their income and housing.

If the business cannot support you along with the cost of the younger partner(s), then more radical business changes may be required in terms of increasing efficiency/profitability or structural change such as part disposal of assets.

2) Who will be responsible for control and decision-making? Often, the younger generation offer new ideas and management styles, while the older generation bring experience and financial sense which are equally valuable. Decide on your ground rules before making any business changes.

3) What about other family members? Business owners often feel that other children should be recognised, even when there is a clear business successor.

There are many ways to deal with this, however tax implications and the protection of the core asset are paramount.

In summary, it is positive that the scheme has been a catalyst for succession, however I strongly advise you to seek specialist advice to ensure your family circumstances are properly catered for.

In the next few months we expect to hear details of the start-up grants available under the new CAP regime – these may offer better terms and/or may be more suitable for some farming businesses than the top-up payments.

The information provided in these articles does not constitute definitive professional advice and is provided for general information purposes only.