What Legal Issues should 21st Century Farmer consider?
Jun 9, 2016
Farming is not the simple life it sounds. There are a number of important issues that farmers have to consider besides just running their farm and one of the most important is the succession of their business. This is particularly true if the farming business has been handed down through generations of the same family.
Succession planning needs to start early as there are a number of tax implications, along with the issue of Inheritance Tax too. You’ll need to tie up your Will, your pension and all of your investments to make sure that your succession plan works for the person you’re passing the business onto.
You might consider putting a partnership or shareholder agreement in place if this is appropriate, alongside the wishes about your business in your Will. The most important aspect of this is to completely understand the ownership of the business. Asking a solicitor to talk you through the legal ownership of the business will give you a clear perception of what is yours to leave.
Tax is another issue for you to consider. Agricultural property carries Inheritance Tax relief, so it can be passed on either tax free or at a reduced rate. This can be done either when you die or during your lifetime, meaning you can pass on the farm to your successor if you can no longer manage the farm yourself. A solicitor can provide you with advice about which items have tax relief and which don’t.
You should be aware that there are categories that are not subject to the same tax relief. This includes items such as:
- Machinery and equipment on the farm
- Derelict buildings and
- Harvested crops
There are other rules and regulations around Inheritance Tax relief, so taking advice from a professional is very important. In addition, if there is no scope to claim Agricultural Relief, you could claim Business Relief instead. You cannot claim both.
Protection of the farm is another consideration and if you are succession planning for one of your children, a Prenuptial or Postnuptial agreement could help them to protect the farm from being split 50/50 in a divorce.
This could come across as a little cynical, but a family business has to be protected. As with any Prenuptial or Postnuptial Agreement, the court would review it to ensure it was fair and proportionate before deciding whether to apply it.
If you’re a farmer looking to secure the future of your farm, talk to us today. You can call us on 01264 353411, email us: firstname.lastname@example.org or fill in the no obligation contact form on our website and we’ll be happy to help you.
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