| Diversification
Farm diversification made possible with LEADER grant
A farmer with no previous catering or butchery experience was given the confidence to diversify thanks to a £ 16,000 grant from the LEADER Programme .
R ob Pratt runs Marbled Meats from his family farm in Northall , Leighton Buzzard , where he raises lambs and Wagyu cows . With LEADER support he is now able to process meat and sell from the farm gate .
“ Our aim is to produce the best beef and lamb products possible , ones that taste better than those from supermarkets ,” says Rob of he and his teams ’ plans for growth . “ If we can get that aspect right , then the fact that we have the animals from birth , and raise them and process them ourselves , gives our customers the confidence they want and need when buying meat products .”
It wasn ’ t always so for Marbled Meats , who previously relied on others for processing and selling their meat . In the knowledge that taking control of the whole process would give his customers the necessary confidence , he began to formulate plans for diversification . But with no previous sales or butchery experience , Rob was in need of practical and moral support .
“ I knew about the LEADER programme and the support they offer rural businesses ,” explains Rob , “ so I got in touch and was immediately supported by the team . I wanted to purchase a catering trailer and to install our own processing facilities at our farm , and received a £ 16,000 grant in order to do so .
“ The LEADER team were there every step of the way with me . It felt like they were on my side and wanted me to get the funding .”
Will Dallimore , LEADER Project Manager , said : “ I am delighted a LEADER grant has had such a positive impact on this rural business to ensure its future growth and prosperity .”
Diversification & tax
Will added : “ So , whether you are a farmer , grower , small shop owner , forester , member of a community group , or run a rural business of any kind , you could be eligible for a LEADER grant .”
With his farm now equipped with processing facilities and a brand new catering trailer with which to sell directly to customers at events , Rob has been able to hire an additional full-time employee , and another on a parttime basis .
“ I wouldn ’ t have been brave enough to go through with it all if it hadn ' t been for LEADER ,” says Rob . “ LEADER gave us the confidence we needed . And when you have confidence in what you are doing and what you are selling , you are better able to interact with customers and get more sales .”
Rob is in no doubt as to the role the LEADER grant has played in this development . “ First , LEADER was our safety net , giving us the confidence we needed to dream big . Then , LEADER became our springboard , helping to take us to new heights .”
The LEADER Programme delivers grants of between £ 5,000 – £ 100,000 to support business growth in rural areas . Example projects eligible for funding include farm shops , farming & forestry machinery , glamping , local food initiatives , food and drink processing , and many more .
Funding is available for a limited time only , so get in touch to find out more . Call the team on 07802 411040 / 07375 019227 or visit www . leader-programme . org . uk
Philip Whitcomb of Moore Blatch examines the issues surrounding diversification for farmers and loss of APR / BPR .
I t is a truth universally acknowledged that a man is not going to make his fortune from just farming . At least that is what John Doidge , a farmer near Alresford , recently said to me . John is what the man in the street would describe as a typical farmer . He has a small dairy herd , a few hundred acres of land , a mixture of old and new farm buildings and a four bedroomed farmhouse overlooking the Hampshire countryside . He hopes that his son , also called John , will one day take on the family business . Yet despite this idyllic lifestyle , John is worried about the future . With Brexit ( hard or soft ) comes uncertainty on future milk prices ; whilst the Government has guaranteed the Basic Farm Entitlements to 2020 there is no guarantee that payments will continue after that date and it is not as if his current business is making huge profits to help him through the lean times . So John , like many farmers has decided to diversify . The plan being to convert
www . farmingmonthly . co . uk the old farm buildings into possibly self-catering holiday lets or ( if he can get planning ) modern offices . This all seems sensible planning to provide an additional source of sustainable income for the future of the farming business , but careful consideration also needs to be given to the tax issues surrounding diversification . In John ’ s case because of his age ( 69 ) and the desire to pass on the business to his son , inheritance tax and the availability of agricultural property relief ( APR ) and business property relief ( BPR ). John naturally assumed that APR would still be available on those farm buildings but this is not the case since they are no longer being occupied for agricultural purposes . Even if John was considering wind turbines and photovoltaic ( PV ) electricity generating units as a way to increase income the land would no longer qualify under the occupation test . So , thoughts turn to BPR . Where business assets have been used within a farming business for at least two years before death , BPR at 100 % is achievable . However , if
John is simply collecting rent each year , with minimal management , provision of services and costs being incurred by him , then it is likely that HMRC will deem this activity as merely rental and so deny the relief . Working closely with the accountant and lawyer , careful thought needs to take place on the structuring of the activities to ensure that even if APR is lost , BPR will continue to apply . Firstly that there is a genuine trading activity , for example the power generated is being sold to the National Grid . Secondly , whether those PV and turbines are being owned and used within the business or held outside and merely used by the business . The former means 100 % BPR is available and the latter only 50 %. Particularly where a farming partnership is involved the position is often murky and unclear as to whether assets are owned by the business or are in fact personal assets of the farmer and are merely used by the partnership . It is important for this to be clarified since the difference in inheritance tax payable can be significant .
Further advice then needs to be taken on whether the assets are incorporated within the business , or ( for a partnership ) held on separate capital accounts , perhaps in a different ratio to the capital of the main farming business and whether new documentation needs to be drawn up to ensure clarity on ownership and rights . Finally , where the traditional farming business continues with diversification get advice on whether on balance “ in the round ” the non-trading elements of the business ( holiday lets where little or no additional services are provided ) will still qualify for BPR at 100 % following the principles laid out in the Farmer & Giles case . In order for farmers such as John to survive there is often a need for diversification to bring in an additional income stream . However , that change of use may jeopardize the future availability of APR and BPR unless careful planning is done at the same time . With the average age of farmers now in the late 60s there is a ticking time bomb for those who fail to get that advice .
July 2017 | Farming Monthly | 17