Farmers could enjoy a buoyant couple of years ahead of Brexit but the industry may face another downturn after 2020, experts have warned. It is therefore vital that they re-evaluate their business plans to make the most of the good times and protect against future volatility.
Speaking at a meeting in Newton Abbot, Devon, on Monday (5 December), Andrew Vickery, head of rural services at accountant Old Mill, said farmers were currently benefiting from the weak Pound following the EU referendum. This was making exports more competitive and had boosted the basic payment by 16.5% in 2016. “If currency stays weak we could have two or three very good years.”
However, the uncertainty of Brexit and the 2020 CAP reform meant farmers had to prepare for a future with ambiguous government support, warned Paul Blundell, relationship director in rural services at HSBC. “It’s really important to look ahead and have those conversations now – don’t wait until 2020 to start planning,” he said. “You need to get your business in a shape that you can farm the way you want to without financial support.”
Given the current straitened times, many businesses were reconsidering their long-term strategy, including succession planning, with some extremely positive outcomes. However, those who had invested heavily with the use of capital allowances, and who were now restructuring or retiring, could crystallise large profits when selling plant and equipment, warned Mr Vickery. “It could be worth re-evaluating the business structure to reduce the resulting tax liability.”
However, any changes in business structure must be reflected in personal Wills, added Ashfords solicitor Jonathan Hickman. “A poorly drafted Will can cause just as many problems as not having one: If you change your business structure you will need to review your Will,” he said.
Having an open dialogue about succession planning could also enable a business to reduce its tax liability, he added. This included identifying assets which qualified for Agricultural and Business Property Relief, and whether the main house was eligible for the new Residence Nil Rate Band (RNRB). “If your whole estate is worth more than £2m the RNRB will be tapered down and above £2.2m it will not be available at all, so it could be worth using lifetime gifts to maximise the tax reliefs available.”
Being proactive and planning ahead could make the difference between a successful, viable business and one that didn’t survive, warned Mr Vickery. “Don’t be too complacent. Agricultural tax reliefs are very generous at the moment and the Government would find it politically very easy to change them: Make the most of the good times while you can.”
- For more information contact Andrew Vickery on 01392 351314.