Opportunity for Change
Farmers now have a golden opportunity with the introduction of the new Single Payment Scheme. Through the myriad of different rules and regulations that have been created by this new Scheme it is important not to overlook the one characteristic common to all farmers - the ‘decoupling’ of subsidy payments from production. Farmers can now derive an annual flow of subsidy income without having to produce any commodities at all!
Despite all the disruption and form filling involved, this new concept will enable farmers and landowners to take stock of their businesses; and the big question for many will be ‘should I continue producing?’ Whilst the answer should be ‘yes’ if a profit can be made and ‘no’ if not - unfortunately in reality it is not quite that straight forward.
 | World markets, supermarkets, and the weather are just a few of the factors that cause annual fluctuations in farming fortunes, and the industry is as a consequence well adapted to “taking the rough with the smooth”. For most the next questions are ‘what shall I do with the land and buildings if I cease farming?’ and ‘how do I maximise my returns from these valuable assets?’ This is a new option for most farmers and a far more daunting decision! |
Unlike agricultural occupations, if a building is let for a business use under a verbal agreement this gives strong security of tenure to the tenant making it potentially very difficult to regain possession if required. |  |
By recording matters in writing, the terms at the outset are made clear to avoid granting extended security of tenure and the document itself acts as a record should a dispute arise. Consideration at this point can also be given to what is included with the building, such as parking areas, the route to the site, the permitted use of the site, who is to be responsible for repairs, maintenance and insurance, how the rent will be reviewed and who will determine and settle any disputes. It is therefore highly recommended that a professional should be consulted when such types of occupation are considered.
With all agreements the process of recording the terms requires both parties to focus on all aspects rather than the matter of simply which land or building is let and for how much. It is the surveyor’s task to analyse specific situations and to “Crystal Ball Gaze” on behalf of the parties to create an agreement that caters for all eventualities whilst ensuring an amicable relationship.
For land, it is important to be aware that there are numerous options available to facilitate an income stream either in the form of a rent, licence fee or through the continuation of farming in ones own right without actually having to undertake any physical work or retain capital in machinery and buildings. |  |
Since the introduction of Farm Business Tenancies (FBTs) in 1995, there is no longer any danger of creating a “full” Agricultural Tenancy with lifetime security of tenure and vacant possession can now be obtained at relatively short notice if required.
FBTs are considerably more flexible than their predecessors and can include generally any terms that the parties agree. A tenancy guarantees an income return for the landowner with the risk of farm production being passed to the tenant, which in today’s market is a major advantage!
Alternatively, a Contract Farming Arrangement can be used to maintain the legal status of a farmer without the physical work and time commitment. With the owner of the land remaining the “farmer” running a business, this option also enables one to comply with the new “Ten Month Rule” and thus claim the new Single Farm Payment.
For existing tenants where sub letting is prohibited this option enables the pursuit of other activities such as off-farm employment, without risking a breach of tenancy. There are also considerable advantages to this arrangement for the purposes of Income, Capital Gains and Inheritance Tax.
Correct management and administration of Contract Farming arrangements is essential to ensure the nature of the arrangement intended does not evolve into something different, such as Landlord and Tenant, rather than Farmer and Contractor.
Therefore, with the correct consideration or the situation and agreement implementation, an income can still be generated from the land and buildings, whilst maintaining valuable taxation advantages without having to necessarily sell the farm or surrender a tenancy.
- Ashby de la Zouch
- 01530 412821
- Banbury
- 01295 271 555
- Knutsford
- 01565 757970
- Market Harborough
- 01858 410 200
- Newark
- 01949 851815
- Southampton
- 02380 883150
- Stafford
- 01785 220 044
- Worcester
- 01905 453275
