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Take a closer look at diversification - is it for your farm?
Most farmers understand the basic concept of diversification e.g. utilising your land for commercial ventures other than agricultural matters, such as renewable energy, farm shops or office development of redundant buildings.
Economic changes particularly over the past 10 – 15 years are such that the bigger picture of diversification may be on your mind / already a work in progress. Perhaps, most importantly, the fiscal uncertainty arising from the decision in June 2016 (widely referred to as Brexit) are such that the risk of loss of or significant detrimental changes to the Basic Payment Scheme (BPS) of financial help for the farming industry are forcing the consideration of diversification for many in the agricultural community generally.
We have already seen the apportioned value of the BPS entitlements fall in the course of land transactions where land is being acquired with the ‘benefit’ of them. This inflates the value of the price paid apportioned to the land and can carry tax implications.
One of the original diversification options was the farm shop; this concept ranging from a small roadside cart selling the produce of the farm with an honesty box to a much more formal sophisticated shop offering wide ranging produce from many different sources including but not limited to just the farm.
Farm shops are commonly found to further diversify in offering café/leisure facilities and there are many popular tourist attractions in the form of play farms, petting corners, maize mazes etc.
Also on the tourism front, the concept of holidaying in a working farm is ever popular with farmers offering basic /advanced caravan and camping facilities to glamping to boutique full board options.
Other, perhaps more paper based than labour intensive diversification options include housing wind turbines, solar panels or power storage options; leases/easements/wayleaves for matters such as the ever expanding telecommunications industry or the more permanent possibility of property development (including selling off un-used farm buildings or selling land to third party development companies).
With many of these options you will need to have additional labour: consideration should be given as to whether you can get ad hoc assistance from say a consultant/self employed contractor or indeed whether you will need to employ staff. Employing staff, even on zero hours contracts, carries significant burden.
The correct consideration of any possible diversification, regardless of whether or not you will need to employ staff from the outset, should include a full analysis of the concept. Specifically you should contemplate the different legal and regulatory requirements and options arising from your idea. If initial indications are favourable then the preparation of a full business plan will be necessary.
A business plan is also an essential key to unlocking any possible financial support (be it a grant, bank loan etc.)
Full and correct legal and accountancy advice (particularly in relation to tax reliefs and tax planning) at the outset is crucial to a successful outcome. It is imperative that the decision to proceed with any form of diversification is a fully informed one.
As panel solicitors for the NFU, Crombie Wilkinson are endorsed by the NFU for provision of legal services. We offer legal advice and assistance in various areas of law that may be necessary for different diversification options including all property related matters, renewable energy leases, easements/wayleave arrangements, sales, purchases, leases, planning law), company and commercial (start up businesses, partnerships, limited companies) and private client matters.