Caroline Baines
Posted on 13 Feb 2018

Succession: Facilitating new entrants and exits

The focus of the TRIG working group looking at structural change was on new entrants starting a farming business. The group acknowledged however that new entrants were inextricably linked to those looking either to retire or for new farming models, therefore the report covered both sides of the coin. The group also highlighted the need to address opportunities for new entrants in due course to move onto farms and land to grow their businesses once they were established.

New entrants

The working group defined new entrants as comprising “anyone of any age looking to start up in farming business either on their own or in a range of various legal agreements where they work with an existing business or person”.

The main issues which hinder the establishment of new entrants were identified as follows:

  • the lack of availability of land and buildings
  • a lack of research into numbers of new entrants
  • the difficulties in accessing finance, including availability of Basic Payment Scheme subsidies
  • inadequate business knowledge
  • a lack of understanding of available business models, such as joint ventures
  • a dearth of tenancies on offer
  • the current marketing of land opportunities, which requires improvement.

Out of those discussions the working group established a number of priority recommendations:

New business models for accessing land

The non-purchasing land market should be opened up to allow a much wider access to land through different routes, using a whole array of business models and agreements.

The working group wants to encourage new entrants, land owners and supporting professionals to be far more proactive in generating land and business opportunities for new entrants. Tenancies and a variety of joint ventures both provide ways of working which could benefit all parties; these need to be developed and expanded. It was identified that more work needed to be done in the area of joint ventures and support given to organisations working with this.

Further development of National Land Partnerships Service

There has been some evidence that potential new entrants are willing to move to a land opportunity out of the new entrant’s area, if the right land opportunity came along; this has already been facilitated through the existing work of the National Land Partnerships Service. Further development of this service was identified as a way forward. This would allow the service to widen its matching service, signposting and knowledge transfer over the transition period of Brexit.

Creation of a business guarantee loan scheme

The working group recommended that a business guarantee loan scheme was created to help new entrants to get started. This would not be a grant, but a loan, so repayments would be included within a business plan. It was acknowledged that such a loan might also be available to established new entrants who wish to move onto a larger holding.

Clarification of taxation position for land owners looking to work with new entrants

A clarification and consideration of taxation issues for landowners looking to work with new entrants or to help new businesses is seen as being essential to the development of opportunities for new entrants.

Improving business skills

Development of business and technical knowledge surrounding options for new entrants is needed for all parties, including their professional advisers, especially against the backdrop of a rapidly changing agricultural market. It was also highlighted that business training for new entrants should be available on an ongoing basis as their business develops.

Exiting farming: retirement and succession

As with new entrants the working group identified a number of issues which were discouraging farmers from retiring or entering into new farming models. These included:

  • finance – debt and taxation issues
  • difficulty in obtaining alternative housing for retiring farmer
  • cultural issues – seeing retirement as failure, not appreciating role of mentoring
  • lack of knowledge of retirement options, pensions, planning and joint venture options.

After a wide discussion of these deterrents the working group made the following priority recommendations:

Taxation

It was identified that work was needed on taxation affecting retirement, namely on Inheritance Tax and Agricultural Property Relief. These issues are explained in more detail in the separate article on Taxation.

Creation of retirement ‘outgoers’ scheme

The working group recommended the creation of a retirement outgoers scheme under which information and advice would be provided through a central delivery system or hub.

This scheme could provide support with pension planning, housing and family considerations. In addition the provision of free “succession surgeries” could be considered to help start the process and discussions. It was also recommended that the targeting of younger age groups would be beneficial, to ensure that retirement and succession planning starts much earlier on.

Planning review regarding new properties for retiring farmers

Having established that the current planning regime hinders retiring farmers from converting or building new dwellings, the working group recommended a review of the relevant regulations to help facilitate the provision of alternative accommodation in these circumstances. Within any planning assessment, housing for retirement should be considered “essential” rather than “desirable”.

Support for housing organisations

Better use of and support for farming housing organisations, such as Addington Fund, was recommended to provide help to more farmers. It is hoped this would change attitudes so that such options would be regarded as a real solution offering a route to retire with dignity.

Improving knowledge and access to joint ventures

Encouraging the inclusion of joint ventures within succession plans was proposed, coupled with the possibility of financial support for retiring farmers who work with such a venture as part of their retirement plan. It was noted that this option would allow farmers to step back slowly and continue to feel valued, whilst remaining involved in the business and in their local community.

Further training of industry professionals

The potential for specialist retirement advisers providing bespoke advice was recommended by the working group, alongside further training of industry professionals to encourage the discussion of retirement options at an earlier stage.

The Future

Brexit will give UK Agriculture a chance to reinvent itself in many different ways. There have been barriers to new entrants for decades and without a seismic shift in approach, the need to consolidate holdings to gain efficiencies of scale will only serve to place the dream of having a farm even further away for most new entrants.

The recommendations of this working group correctly identify many of the obstacles, which for so long have discouraged farmers from succession planning and retirement. These include several issues, which have been identified as problems before, yet the industry has ducked previous opportunities to remove these. Perhaps the prospect of Brexit and an acceptance that wholescale change is on the way will create enough momentum finally to sweep these obstacles away.

As with the industry’s future approach to subsidies, it is most definitely time to think outside the box with regards to the structuring of farm businesses. If developed in the right way these recommendations could lead to the creation of all manner of different joint ventures between those with knowledge and experience and those starting out. But this will only happen if farmers and their professional advisers are sufficiently knowledgeable, creative-thinking, organised and courageous to step outside the well-established and comfortable norms and embrace new structures and ideas.

This will inevitably involve in part a move away from the standard form, which has governed most arrangements for decades. Each joint enterprise is likely to be different – a bit like the share farming arrangements, which became fashionable in the 1980s – so that it addresses and plays to the particular strengths and weaknesses of each of the parties. Farmers will doubtless need persuading that the inevitable time and cost involved in setting up bespoke arrangements is justified. But, if accompanied by carefully structured tax reliefs and other advantages to support the proposals, there is real potential to bring about the structural changes which the working group has identified are required.