Leaving your business in safe hands

Deciding how to hand on a family dairy unit or farm business to the next generation, partner or manager can leave producers feeling fraught, but it can be achieved with careful consideration and proper legal agreements.

Peter Dixon Smith told delegates, after 50 years of farming – including building the renowned Lyons herd – preparing to hand on the business to someone else’s control was one of the biggest decisions of his career.

“I know it can be done successfully and, perhaps, provides a formula for others (producers) to follow,” he suggested.

The transition of the initial business of Dixon Smith (Lyons) to a newly created venture, Keythorpe Farms, a partnership between Mr Dixon Smith and farm manager Wil Armitage, saw the original holding entered into a 10-year FBT.

Key agreements, set up with solicitors, ensure Mr Armitage – as any successor – has the incentive to make sure the business delivers profit. “A notional salary is paid to Wil and I receive a notional rent,” explained Mr Dixon Smith, ensuring both sides have an income.

“Interest on capital invested in the business is split according to the level invested by each partner. Ninety per cent of the first £10,000 profit goes to Wil, with surpluses beyond that divided between the partners using a formula agreed between ourselves.

“Importantly, Wil is responsible for the business I can put in as much or as little time as I wish,” he continued. That allows each party the freedom to achieve their respective goals.

However, business agreements aside, a long-term view had to be taken to ensure the assets of the business were passed on from Mr Dixon Smith to his successors free of inheritance tax. Good solicitors’ advice was paramount, he added.