Many farmers are reassessing their business plans in light of Brexit, and it’s vital that they add succession planning to the agenda, according to the Central Association of Agricultural Advisers.
Brexit is likely to produce not only a more challenging environment for farming but also a more commercial one, so it’s important to get all aspects of the farm prepared for the future, says Jeremy Moody, secretary and adviser to the CAAV. “Farmers have perhaps seven years to adapt as Brexit will be a developing process with transitional periods,” he explains. Though the issue of succession is always there for families, this transitional period could be a key opportunity to get succession planned while reorganising the farm business to cope with other changes.
Although each situation will be individual, the same issues come up across the board when succession planning, says Jim Aveline, partner at Burges Salmon solicitors. It’s about finding a balance between passing the assets down and stepping back, while still maintaining a bit of control and not losing them to divorce, death, tax or bad planning.
Often, farmers are worried about weighing the interests of different siblings while still making succession work for the business, advises Mr Aveline. “But keeping the business together can be more important than being fair. The younger generation need a bit of certainty and reason to commit to the business, while the other siblings need to know what they are going to get.”
The easiest way to deal with this is to pass the farming assets to the immediate successor and non-farming assets to the other siblings – but often these assets are needed to keep the whole farm going, warns Mr Aveline. “In these cases it may be worth working out the value of the non-farming assets and paying the siblings from the business, as and when it can afford it.”
Business owners should also ask whether the immediate successor is the right person for the job. “Farming businesses are going to face changes in the form of support payments and market access,” says Mr Moody. “Anyone taking on the business will need to be adaptable for change and able to take the business forward – not continue for the next 10 years in the same way as the past 10 years.”
Businesses may need a new approach under independent UK farm policies. “It may be that the business to be passed on is no longer fit for purpose – it used to work but no longer does in the current environment or in the future,” warns Mr Aveline. “This could be down to the business model, or the person it is being handed down to – are they really up to it?”
When it comes to paperwork, pre- or post-nuptial agreements can be important. “In the case of a divorce, the starting point is a 50/50 split, unless you have an agreement that ringfences assets,” says Mr Aveline. “Having an agreement in place can stabilise a family.”
The same is true of having a will. “Intestacy can go terribly badly and can take the business to bankruptcy,” he warns. “It’s important to be open about these things while you can and while the older generation are alive. Make sure everyone knows what the plan is.”
Mr Moody recommends getting a trusted adviser involved, not just for reshuffling the business, but also for planning succession. “These sort of changes can make or break a business so it’s vital to get it right first time.”
For more information visit www.caav.org.uk.