The average age of a farmer in the UK has risen to 58.
If you're a farmer you're probably not surprised, especially in an industry where individuals often work long (and hard) beyond the normal retirement age. However, it does make it even more important for you to plan carefully the handover of the farm to the next generation and to consider succession issues generally. Failure to do so may well trigger a large inheritance tax bill.
You may also need to review the farming operation as a whole to ensure that you have structured the business and its assets so as to maximise the tax reliefs available. Otherwise, tax liabilities could jeopardise the viability of the business or make it impossible for your intended heirs to continue farming.
Surprisingly, a recent survey found that a significant proportion of farmers had made no plans for the succession of their farm. Make sure that you are not part of this statistic otherwise illness or sudden death could throw your business into disarray. Planning for these eventualities is critical to ensure a smooth transition and to protect your farm's future.
In the absence of a Will, the Intestacy Rules dictate who inherits your estate. This may not have the intended result. Making a Will gives you the opportunity to set out your wishes and to empower executors (chosen by you) to keep the farm going during the administration of your estate.
Bringing in the next generation
You can make lifetime gifts of farm assets or interests in the farming business to help ensure that the next generation can start to play an active role in your business. Lifetime gifts may also offer the opportunity to save tax if undertaken correctly. Care must be taken to avoid a capital gains tax liability.
This may often be a good opportunity to review your affairs generally and lay the foundation to potentially save your family and heirs thousands of pounds by considering tax planning measures to suit your circumstances.
Work undertaken recently by us includes:
- Advising upon the structure of farming businesses and partnerships, the admittance of sons / daughters into partnership, the partnership deed and the tax implications of such changes.
- Considering the use of lifetime trusts and gifts into trusts of property as part of an overall strategy to minimise inheritance and capital gains tax and to provide protection in the case of a divorce.
- Drafting Wills which will help to ensure any available tax reliefs are utilised and incorporating powers to ensure that the Executors can keep the business going during the administration period.
- Considering appropriate strategies to achieve succession under the terms of Agricultural Holdings Act tenancies.
- Advising on the introduction of assets into the farming partnership to maximise available tax reliefs.