22 January 2019

Three key pieces of advice from our regional legal experts.

Talk to each other, plan properly and ensure you seek professional advice – three key pieces of advice from our regional legal experts who are commenting, following the release of a major NFU Mutual report into farm diversification.

NFU Mutual has released its most comprehensive study into the issue, speaking to more than 200 farmers who have set up diversification businesses, or are planning to do so.

The report’s release comes in the wake of the Government’s proposed new Agricultural Bill. The Bill, which is now at Committee stage, sees significant change in the way our rural economy is funded with direct farm subsidy payments set to fall after 2021.

Under these planned new proposals direct payments, as seen under the present CAP (Common Agricultural Policy), will be phased out by 2027, replaced by a system that the Government says is designed to ‘secure a better future for UK agriculture and for the environment’. When you consider how UK farmers currently receive £3bn-a-year from the CAP scheme, you can see how its cessation without proper understanding and planning could have severe consequence.

So, what are the highlights of the NFU survey and what is the experts’ advice for the region’s rural businesses? Wilkin Chapman solicitors, with offices in rural Lincolnshire and East Yorkshire, has a team with a vast knowledge of the sector, along with tourism and renewables specialists. Here are their thoughts:

  • Over 60 per cent of UK farmers have diversified in some way, says the report: Solicitor and agricultural specialist Amy Slocombe Smith, says: “With direct subsidies set to fall, there is of course a need for land-owners and farmers to look at ways in which they can secure a farm’s future for the next generation. However, it must be carried out with careful planning and thought to protect both individuals and the business. Under the proposed Agriculture Bill, Defra has said that the remaining direct payments during the seven-year transition period will not be dependent on whether the recipient is farming. With the potential ability to receive that support in a lump sum, businesses can look to invest in diversification or to fund business restructuring. Now is the time to think about what assets you have, your surroundings, and the procedures that need putting in place to do it correctly. These things take time, so it is as well to talk to each other and professionals – from the planning stage to execution, even if the latter is only started once the uncertainty of Brexit has resolved.”

  • Of those who have already diversified, over 90 per cent claim success, with 63 per cent saying the diversification has proved ‘vital’, the report outlines. Diversification projects highlighted included renewables, property letting, tourism (holiday lets) and farm shops. Those looking at future diversification were planning camping and caravanning sites, other holiday accommodation and renewable energy projects. Solicitor Sarah Elizabeth Kemp is in our Corporate and Commercial team and has extensive knowledge of the holiday and caravan park industry.

    She says: “Diversification from farming to camping, and particularly glamping, has been proving more and more popular over the last decade. It is a competitive market and customer expectation is high. Getting it right doesn’t have to be about an extensive budget - quirky and rustic facilities are popular in this market but guest requirements must be catered for. Considering who your target customers are and how much you are prepared to invest in such a project is a key first step.

    It’s highly likely that you’ll be changing the use of your land, so in most cases planning permission will be needed. Specific licences may also be required depending on the type of accommodation business you’d like to start. Factors such as siting, access routes, visual impact to the surrounding landscape and water management can affect the success of a planning application and are vital considerations to be aware of at the beginning, but if you can demonstrate that your glamping or camping business will generate benefits (economic, environmental, social) this should help with gaining planning approval.”

    Renewables diversification: Partner and Agricultural specialist James Lloyd explained how diversification into renewables falls broadly into two categories for landowners: leasing arrangements with developers and do-it-yourself projects. “Specialist advice is clearly key, and landowners should not be shy to look at asking appropriate professionals what opportunities may be available. It is then essential that your team of professionals are consulted from the outset to guide any decisions and make sure the benefit is maximised,” says James.

  • Of those who had diversified already, 19 per cent received a grant, with only 30 per cent considering the future tax implications of their project, says the report. Wilkin Chapman partner and tax specialist, Nasim Sharf advises: “The UK government encourages rural diversifications, including via generous tax breaks. We work closely with our clients’ accountants and other advisers to help structure ventures in a tax efficient way, especially in the early years when cash flow can be tight.”

  • The majority of the diversification projects featured in the report are run by a member of the farming family: James Lloyd stresses how important it is to take this into account when planning: “It is important, and now more than ever, that farming families and businesses need a very clear idea of where they are going from now into the future. Up to 60 per cent of UK farming businesses do not have a succession plan in place, but farming businesses and families need a clear action plan to help them in future to ensure long term success of any diversification venture.”

For advice on any issue regarding diversification or planning for the future, our team is happy to help.

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