The Farmers Mart Feb-Mar 2019 - Issue 61 | Page 22
22 FARM NEWS
FEB/MAR 2019 • farmers-mart.co.uk
PLANNING FOR RETIREMENT
IN A FARMING CONTEXT
Many will be aware of the recent case of Vivian Exelby, an elderly farmer from Cornwall who has
been banned from keeping livestock for life after being found guilty of 12 animal welfare charges.
THE image of an aged farmer
struggling to cope with the de-
mands of running a farm - either
on his own or perhaps with a
similarly ageing partner - will be
familiar to anyone with involve-
ment in the rural sector.
Part of the issue is that farmers
tend not to “retire” in the sense
that many in the non-rural world
understand it. Whilst a farmer
may reduce their workload over
a series of years, often this is the
result of physical capability rather
than attaining a particular age.
For those with relatives who
are interested in the farming
enterprise, given enough time and
professional advice, ageing farm-
ers can arrange for an orderly suc-
cession to the farming business,
secure the business for future
generations as well as securing
their income in retirement.
However, for those without an
immediately apparent succession
plan for the succession of the
business, what can a farmer do to
provide an income into retire-
ment and preserve the value of
his assets for the next genera-
tion?
First, perhaps there needs to
be an acknowledgement that
“struggling on” is not a long-term
solution: animal welfare issues
aside, being the subject of such
judicial sanctions such as those
in the Exelby case can have a ruin-
ous effect on the farming business
and will dramatically reduce the
options available for future proof-
ing the business.
Two options - selling the land
and leasing the land - will be fa-
miliar routes to exiting the farming
business but are often terminal
for the farming business, and tax
considerations may make these
routes particularly unattractive.
Two other options worth con-
sidering - especially where there
is a desire to keep the farming
business as a going concern for
one reason or another - are con-
tract farming and share farming
arrangements.
Contract farming arrangements
involve the farmer engaging a
contractor to carry out various
(usually labour intensive) activi-
ties. Often the Contractor will be
paid periodically for the labour
and machinery used on the farm,
with the profits arising from the
sale of produce being shared be-
tween the Farmer and Contractor
according to a pre-agreed ratio.
In this way, whilst the Farmer may
not have a guaranteed income,
the Contractor should feel incen-
tivised to provide a high level of
service, better quality produce
and therefore a better sale price.
If these arrangements are entered
into in order to take advantage
of the various tax reliefs asso-
ciated with farming “in-hand”,
it is important that professional
advice is sought on the terms of
the agreement in order to assess
the likelihood that tax reliefs will
be available. Many of the standard
form contract farming agreements
that we see are not suitable for
APR and BPR, for example.
Share farming arrangements are
in essence a collaboration of two
or more businesses and the fun-
damentals will be familiar to any
farmer who has farmed as part of
a partnership. Share farming ar-
rangements however tend to lack
the familial element that many
farming partnerships possess, and
each share farmer maintains its
own business and has more free-
dom than is often associated with
a farming partnership. The agree-
ment should set out each farmer’s
responsibilities (especially on the
costs of the farming activities) and
how the profits should be divid-
ed. Share farming agreements
are often annually-renewed
agreements, giving each party an
opportunity to freely negotiate
the share of the profits for the
next year. Commonly they require
a more “hands-on” approach for
both parties to the agreement as
well as ongoing commercial and
relationship management.
Above all, one should remem-
ber that these arrangements are
all means to an end, and therefore
it is imperative that professional
advice is first sought in order to
identify what the intended out-
come is whilst also taking into ac-
count all relevant considerations
such as: taxation, appetite for risk
and wider succession planning.
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