In many of my meetings, especially when discussing succession planning for a farming family and the question of retirement comes up, it is a comment that generally results in a smirk or an outburst of laughter . However, it seems in more recent months that I am seeing more farming families considering coming out of the farming industry.
It was recently reported in February 2020, following the National Farmers Union Conference, that food producers have said that the challenges they face are the toughest in a generation. This seems to be a mixture from labour shortages, which predominantly seems to have been caused by Brexit, and then of course Covid.
The Grocer recently commented in addition to these challenges, that farming and food production costs rose by more than 30% in April. With all of this in mind, it is not surprising why I find myself having more conversations over retirement or even a farm sale.
It seems that the sector is not necessarily as appealing as it once was and is certainly facing an extremely turbulent time over the coming months, if not years.
One point that needs to be borne in mind, is the impact on reliefs for inheritance tax should a decision be made to move away from the farm.
Although I say to all clients, that they should not make a lifestyle decision purely based on tax matters alone, I do always say that tax needs to be considered when discussing such options so this can be taken into account.
Clients do need to be aware that whilst they continue to farm, whether that be actively farming the land themselves or alternatively, letting land to a third party for farming purposes, then land and buildings can be subject to significant relief from inheritance tax through Agricultural Property Relief. In addition, when we have a farming family, we also have a business and therefore there is also the possibility of Business Property Relief against any qualifying assets.
With the value of land being so high and the rate of inheritance tax being 40% these reliefs can offer a significant saving for tax.
The important approach when considering reducing or possibly ending the involvement with a farm is to bring in your advisory/professional team in as early as possible. This will allow you and your professional team to consider what impact your proposals may have, not only in the short term, but also going forward in relation to your aims for your family and inheritance tax planning.
Napthens specialises in estate planning for rural and farming clients. All of our Estate and Will planning solicitors at Napthens have all achieved STEP status. Therefore, if you are thinking about reducing or leaving the family farm, please get in touch.