Who needs a succession plan?
Everyone! Family farms, partnerships, sole traders. No matter what age, a plan should be in place, it is easier to alter a plan than create one.
How and when do I start?
The earlier the better, once the plan is created it is a lot easier to alter as your life changes. The plan is there to implement your goals and wishes quite often actions will need to be in place early to ensure these are done correctly.
Talk to your agent they can advise you on the best method for your situation then involve the family.
Who needs to know and be involved?
Talk to your agent and once your aims and objectives have been laid out involve your accountant and solicitor. It is more efficient to have all the professionals working together it ensures they are working in the same direction.
And most importantly involve the family! They may want different things than you think!
What if I am a tenant?
A Farm Business Tenancy will not have any succession rights unless stated in the agreement. Otherwise a Agricultural Holdings Act 1986 tenancy can have succession rights depending on the commencement date.
Many people believe a succession will happen automatically this is not true. The successor must qualify and the correct notices must be served otherwise any rights could be lost, again careful planning will help with continuity of farming down the generations.
I have 3 children and they are all interested in the farm, what do I do?
This is why it is recommended to involve the whole family early in the discussion. Establish who is interested in what element of the farm is there an obvious method of splitting the farm. Involving all the professionals enables 3 different viewpoints and expertise. Is there a business vehicle that can accommodate all of the children that will not jeopardise the entire future of the farming business?
Having your agent, accountant and solicitor enables these options to be looked at in depth and examined to ensure they suit the family situation, in its most effective manner.
One option would be to enter the assets into trust to ensure their protection while providing an income to the beneficiaries, or introduce the children to the farming partnership while still retaining overall control.
What is the fairest way to split the farm? Not all of the children are interested.
This is a difficult point in all discussions as to what is fair. Involving the family early will establish what the individuals want from the farm. If a child is interested in taking the reins and continuing the farming business then the assets need to be split in a way that does not invoke a large tax liability, impede on the farming business yet provides the non-farming children an income or asset.
A common split we have been involved with is the commercial and residential property are split away from the farming business to provide the non-farming children an asset that has an income and capital value.
We are owner occupiers with one child I have no need to worry do I?
Yes, having a clear succession plan in place will help identify future plans for the business. You should not assume your child wishes to farm!
The ownership of assets, any restrictions that wish to be imposed and ensuring that no unexpected tax bills occur and tax reliefs are used efficiently is the key to effective planning.
Will there be tax issues?
There will always tax issues with whatever options are chosen but involving an efficient and reputable accountant or tax advisor will ensure these issues are planned for, the relevant reliefs are used and maximised while planning for any tax bill that will be due.
Having your agent and accountant work together from the start will ensure the correct values are used in the tax calculations and the correct reliefs are used and will actually stand up to scrutiny by HMRC and district valuers.
It sounds expensive and I’m only 40 do I really need to worry?
Planning early will ensure you are not fighting fires later in life. A clear plan will have different scenarios based on life events. Once the plan is established it is a lot quicker and easier to alter than create a new plan.
As stressed involving all of your professional advisors may seem drastic and expensive but the efficiency it will create will ensure they do not have wasted time as they will all be aware of the situation and working in the same direction.
The cost of a mistake or not having a plan in place could be incalculable.
There is the old saying of “Fail to prepare and prepare to fail”.