Not the time to hand over?
WITH farm incomes in the doldrums and the value of land and other assets slipping away, many farmers believe now is not the time to hand over to the next generation.
But they may be wrong, says Grant Thornton senior agricultural adviser, Clive Buckland. "Times of low profit are an ideal opportunity to assess how many families a business can support," he says. "If it can support two families now, it is likely to be able to do so in the future. If it cant, then some restructuring is required."
Finding an off-farm income, or taking early retirement are two possibilities. "Most farmers have paid into pension schemes," claims Mr Buckland. Converting them into annuities may not look attractive at todays returns. But compared with where interest rates may end up, it may be the sensible thing to do.
Following the governments recent Budget, the tax regime continues to look favourable, he adds, encouraging the transfer of assets now. "Retirement relief can still be used to avoid capital gains tax, while improving the base cost position for the next generation," he says. With retirement relief being phased out over the next four years – its a case of "use it or lose it".
The recent fall is asset values – which have seen milk quota reach 32p/litre – also provides an opportunity to make transfers. Lower values mean reduced capital gains and inheritance tax, while facilitating a higher return on capital for the incomer.
But for farmers who are reluctant to relinquish total control over the assets, but wish to take advantage of some of the current tax breaks, there are also opportunities to set up trusts.
"Retirement must be carefully planned to ensure the elder generation has a secure income and the younger generation has a secure business, able to generate profits in the future," says Mr Buckland.