Farm succession: how to plan for future control and ownership

There are many ways of achieving the successful transfer of a business.

A planned change over time is the ideal, but the last two Budgets have ramped everything up several gears and put the pressure on.

While the focus has been on the coming changes to inheritance tax (IHT) reliefs, advisers point out that management responsibility and asset ownership do not have to pass at the same time.

See also: Budget highlights need for inheritance document housekeeping

Giving up control

Getting the older generation to give up control gracefully can be a challenge, says Mark Chatterton, head of agriculture and business services director at accountant Duncan & Toplis.

“Learning to trust the next generation, letting them loose and resisting the temptation to meddle is difficult for some people who have built and shaped a business,” he adds.

“There are some very successful successions, ones that have simmered away for 10 years and been planned through. But others we are witnessing are not going so well,” Mark continues.

“There ought to be some training, like for new entrants. It has to be understood that for someone who has had a very successful farming career and probably been the best farmer in their area for many years, it’s a challenge to stand back and hand over control.”

Nurture other interests

Mark recommends that nurturing other interests makes sense.

“Now is the time for some to slow down and retire, like their friends from other industries have done,” he says.

“It’s fine if they have another activity or interest such as golf, horse racing, travel and so on, but if their focus remains solely on the farm business, it can cause problems.”

Understandably, many farmers don’t want to step back completely. 

One solution Mark suggests in such circumstances is for those taking a reduced role to be responsible for a specific area of the family business, which may be an existing enterprise or an innovation such as a diversification project.

Advice on managing change to protect the farm

The IHT relief cuts taking effect from April 2026, and the imposition of the tax on pension funds from April 2027 prompted one farming family to review and accelerate its long-standing intention to pass the farm to the next generation while keeping the business viable.

This was a multigenerational family farming business on about 1,000ha of land.

“Family businesses need challenging or nothing tends to happen,” says Mark Chatterton, head of agriculture and business services director at accountant Duncan & Toplis.

“This example shows how early action, flexibility, and clear communication can secure the long-term future of a farm business.

“This was about helping the family make informed decisions at the right time,” says Mark. “We worked through the options together, clarified what each step meant, and made sure the transition supported both the business and the people behind it.

Separate ownership and control

Separating business leadership and responsibility from asset ownership allows the next generation to learn the ropes before they own a majority stake, which can be achieved gradually, says Mark.

“From my perspective, the most effective successions separate control from ownership in the early stages. Transitioning decision-making, through revised partnership agreements, adjusted profit shares, or board roles, gives the next generation real input before they take on full ownership.

“A gradual shift, supported by clear governance and communication, builds confidence on both sides and avoids a cliff-edge handover, such as might be the decision in some cases, but it can be very difficult to make that work.

“Cliff-edge handovers can also be forced, for example when there is an accident, illness or death, which is very stressful for all concerned and not something you want to be dealing with when there are other personal issues going on for family members.”

The family structure

• Two couples in their 70s led the business
• A younger couple in their 40s was actively involved in farming operations
• The business operated as both a company and a partnership
• Other siblings had been provided for through gifts of cash or assets.

The solution

The family implemented a series of steps.

• Asset transfers: shares and land were gifted to the next generation using hold-over relief to defer capital gains tax (CGT)
• Tax on the transfer of residential property was accepted, with the family choosing to pay CGT on non-business assets (for example, cottages) within the 60-day window for residential gains, rather than risk a larger IHT exposure later   
• The older generation began drawing from their pension fund, which was a company small self-administered scheme (SSAS), and reduced their profit share in the partnership and their dividends from the company
•  The younger couple increased their pension contributions, allowing the land in the SSAS to be moved into their pension funds
• This strategy aligned pension assets with the future and changing ownership of the business while reducing the tax risk.

Gradual transition

“There has been a gradual transition of control,” says Mark. “This followed a principle of owning less after age 75. The older generation now retains only residential property, while stepping back from business control.”

Key learnings from this process include the benefits of planning early, especially when major policy changes are ahead. This gives time to examine all the options, some of which may not at first be apparent.

“Tax reliefs need to be understood and can be used strategically,” says Mark. “Accept that paying some tax is part of a sustainable solution.”

His final tip is to bring in experienced advice and involve the whole family.

Outcome

• Business viability has been maintained under the next generation
• The IHT and CGT exposure has been managed
• Responsibility has transitioned before legal ownership has changed
• Clarity and fairness has been maintained across the wider family
• Conflict was avoided through transparent communication