Farmers Weekly’s inaugural Business Clinic Live at Aston Marina in Staffordshire on Tuesday, 3 December gave farmers the chance to glean topical advice on subjects ranging from tax to tourism.
It was an opportunity to get the latest advice face to face, and free, from experts representing the whole spectrum of agricultural advisers, including insurance brokers, financial planners and solicitors.
We’ve rounded up five key pieces of information that came up in conversation at the event.
See also: Browse the Business Clinic archive
1. Identify your tourism unique selling point
The arrival of Airbnb has increased competition in what was already a fiercely competitive market when it comes to self-catering accommodation, says Charlene Sussums-Lewis of Carter Jonas.
“It’s essential to make your property stand out and become a real destination, which might be through offering such features as a mountain bike trail, a hot tub or a swimming pool and spa,” she says.
Visitors have far higher expectations these days than even 10 years ago and, given the market is saturated in some areas, you need to be inventive.
“This might mean drawing on your farm or estate’s other assets. Or perhaps you could combine forces with a third party to enhance the offering – team up with, say, a yoga teacher or a woodturning teacher? You have to have a unique selling point,” she says.
There are still many parts of the country where the self-catering market is under-developed, so there are opportunities for good returns.
“A family house in a popular region such as the Lake District could command £1,200 to £1,500 weekly rental in the summer and maybe £600 to £700 in the winter,” she says.
“Part of the secret of success is ensuring you have a high occupancy rate. Try to be full for 70% of the year, then view anything on top of that as a bonus.”
2. Fair doesn’t always mean equal when it comes to succession planning
More people are grasping the nettle of succession planning sooner rather than later, according to David Penney of Penney Financial Partners.
“It’s a difficult subject to broach, but starting the conversation is crucial and it gets easier once you’ve begun,” he says.
One adage that is often useful to bear in mind is fair does not always mean equal.
“Because the priority is often keeping the farm intact as a viable entity, it might not be possible to give all your children an equal value, but there are many ways that parents can pass assets to children who don’t take over the farm without compromising the business,” he says.
“One effective and tax-efficient way is through insurance. You pay an annual contribution, then, when you (or the last surviving spouse in a couple) die, the policy releases a tax-free lump sum to the children who haven’t taken over the farm.”
Such policies are popular because they’re simple and don’t compromise the business by splitting up the farm’s assets or selling land, which farmers are often understandably reluctant to do, says Mr Penney.
Depending on the age that a person starts such a policy, this can be a very cost-effective solution for ‘estate creation’ and providing a legacy.
There are many other options that, depending on the circumstances, can be considered to pass wealth to a child who isn’t taking over the farm.
These include one-off gifting, monthly contributions or a ‘whole of life policy’ which is a type of insurance that pays out whenever you die, rather than only if it’s within the term of the policy.
“After you’ve made succession decisions, it’s important to periodically review them because, even if your circumstances don’t change, the legislation and opportunities around you may have,” says Mr Penney.
3. More infrastructure is good news as well as bad
The expected increase in infrastructure projects under the new government will cause disruption and heartache for farmers, growers and landowners – but will also bring opportunities for some, says Matthew Knight of Knights Solicitors.
Margins in many farming sectors are thin with no obvious signs of recovery, but the compulsory acquisition of land – and interests affecting land – will open the door to windfalls for some and annual payments for others.
“It’s not just the project itself, it’s the opportunities that can result from the changes it brings,” says Mr Knight.
“A new road running through a farm near to a settlement boundary might give rise to new development possibilities as a result of the severance caused by that road. The betterment gain could far outstrip any blight attributable to the works themselves.
“Any scheme that threatens the status quo can be worrying and the principle of compulsory purchase can be troubling to farmers, but you’ve got to do the maths.
“The prospect of losing, say, 100 of your 1,000 acres can be hugely concerning, but if that opens up another parcel of land to residential or commercial development making it worth many hundreds of thousands of pounds an acre, then the equation totally changes.”
The nation is facing a chronic housing shortage so there will be many more housing developments in the years ahead, he adds.
There will also be road and rail projects at a local, regional and national level. The ‘waste-to-power’ movement means there will be more demand for incinerators, while the rollout of better broadband could mean another new series of payments for farmers, growers and landowners, according to Mr Knight.
4. Holdover relief is ‘the best-kept secret in agriculture’
Holdover relief provides a fantastic way of passing wealth down through a family, while avoiding a capital gains tax liability, says Mark Chatterton of Duncan & Toplis.
The rules allow you to ‘give away’ assets such as land, buildings and a farmhouse so long as they would have qualified for Agricultural Property Relief (APR) at the time of the gift. You only ultimately have to pay the liability if the asset is sold which, in many farming families, won’t ever be the case.
For example, if you give one of your children fields with a base cost of £20,000 and a market value of £200,000, holdover relief deems you have disposed of the land for £20,000. This then becomes your child’s base cost should they subsequently dispose of it.
Without the relief, you would pay tax on a £180,000 gain, while your child’s base cost for a future disposal would be £200,000.
“I often talk to clients in their 60s and 70s about the potential benefits of this,” says
Mr Chatterton. “At that point in their career, they might not necessarily need to own the business, even if they want to stay involved.
“They could retain ownership of their house, have a pension from the farm and even get paid a salary, but they can gift the asset and claim the holdover. It doesn’t matter when they die, either, whether that’s a year later or 20 years later.
“They’ll still qualify for the full £1m combined nil-rate bands from 6 April 2020 for inheritance tax.”
5. Climate change is altering the insurance market
More frequent extreme weather is leading to new insurance arrangements to leave farmers less exposed to in-field crop losses, according to Richard Beechener of Farmers & Mercantile insurance brokers.
With Lycetts Insurance Brokers, the firm has launched a new crop shortfall policy, covering winter wheat, spring and winter barley and winter oilseed rape.
Using data from Defra’s cereal and oilseed rape production survey, it compares a region’s yields in any one year with yield data from the last eight years’ harvests, paying participating farmers up to 25% of the shortfall of their projected yields in the event of a regional shortfall. Cover is still available for spring barley for harvest 2020.
It would potentially run alongside other policies, helping growers “weather-proof” their income, and heralds a new concept for the UK insurance market, says Mr Beechener.
“It encourages farmers to take a view based on their region’s performance rather than their individual circumstances,” he says.
“So if a heatwave or excessive rain dramatically affects your region, you could receive a payout even if yields on your own farm were good.
“Conversely, it does mean that you wouldn’t be able to claim if the region performs well, even if you were individually hit by adverse weather.”
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.
You can also email your question to firstname.lastname@example.org.