5 April 1996

Stick with lender and renegotiate, beef men advised

By Tim Relf

STAY with your existing lender and negotiate new terms. That is the advice from accountants Grant Thornton to beef farmers facing cashflow difficulties.

Non-essential spending should be postponed, says senior agricultural partner Jeremy Lewis.

Discretionary payments, such as pension contributions, could also be deferred. And tenants may be able to agree with their landlords to defer rent payments, he suggests.

Fixed costs are already well under control on many farms, but even more stringent measures must now be taken.

Banks sympathetic

"Banks will be sympathetic to farmers predicament. But there may come a point where they can be sympathetic no more," adds agricultural partner Graham Latham.

"For many farmers, their businesses net worth has taken a dive and will never recover. Long-term, this has increased their gearing and reduced their borrowing power."

Urgent attention should also be given to the tax implications of the present situation, advises senior tax manager Carlton Collister.

The transitional arrangements in the run up to the current year basis of tax assessment mean that any tax relief available for a reduction in profits could be halved.

To avoid this, it may be worth reorganising the business in a way which, for tax purposes, counts as a cessation and restart, says Mr Collister.

Introduce partner

This could be done if someone were to retire or be introduced to the partnership. "If it were a husband and wife partnership, a son or daughter could be brought in, for example."

&#8226 Full tax relief may not be available from a fall in end-of-year valuations resulting from a decline in stock prices, warns Robert Dunning of accountants Kenneth Easby.

"Farmers who base year-end valuations on market prices may be tempted to adopt the lowest valuation possible. But this may not always be wise, as the uplift in value the following year may be taxed at the full rate."

The general advice from chartered accountants this week is "get advice", whether it concerns changes in stock valuations, averaging of profits or the handling any future compensation payments.