Four non-tax considerations for farm diversification
If anything, Clarkson’s Farm has put a spotlight on how volatile the farming industry can be, with plenty of external factors at play, not least with Brexit and the ongoing changes in the subsidy regime to name but a couple. For some, with winter on the horizon, taking a step back may mean looking at how diversification can act as a bolster for farming income. From converting barns into let properties, to utilising shrub land for renewables, it’s important that tax and non-tax implications are considered.
- Varying values
It’s assumed that value is added by converting buildings, however sometimes it may cost more to convert a barn than to build it from the ground up – be careful to also not devalue a farmhouse by adding housing to the area around it. Obtaining advice from a valuer and planning consultant among others would, in most cases, be worthwhile in assessing the viability of diversification projects.
- Detail in the design
Before work begins, ensure that you strategise the cost of services such as electricity, heating, water, Wi-Fi etc, as dependent on the layout, legal and financial implications can be expensive. This is especially true when it comes to changing the use of land to house sources of renewable energy.
- Planning for the future
The latest research commissioned by NFU Mutual suggests that just 52% of farmers have a formal succession plan in place. Where there are farming and non-farming children in the family, it may be that the farming children are being left the farm and that as part of the succession plans and diversification projects should be considered to build asset value for the non-farming children.
- Learning about the legalities
Ensuring appropriate insurance, planning permission and licenses is vital when considering diversification. For example, some landowners see an opportunity in creating a wedding venue, however gaining licences for this can be complex, with local authorities stating a number of requirements and marriage ceremony licences only being valid for three years.
The considerations of farm diversification are varied, from tax implications, to non-tax repercussions, of which we have covered just four key aspects; it pays to be informed, and to reduce unwelcome surprises.
For more information on diversification and succession planning, or to discuss in more detail, please speak to your local Azets contact or a member of our Agriculture team.