Fisher German Rural Newsletter May 2016




Succession planning is a serious matter

 

 

 
Many owners of agricultural businesses hope to pass the business on to the next generation. However, a large number are held back by inadequate succession planning.
 
Succession is not only about retirement, it is about having a long term plan and its adequacy is critical; particularly with the financial pressures currently faced by British agriculture. 

Fear of conflict
 
All too often Successors feel that it is too difficult to start the conversation for fear of family conflict, while those in a position to hand over the business may believe Successors do not have the right skills or are not sufficiently interested. Full and open discussion between all individuals affected by succession is crucial to fulfil a family’s values and objectives and it may be necessary to accept that equality is not always practical. 

What to consider? 

The first step in succession planning is to get a clear picture of the current position of the agricultural business in terms of assets, ownership and current values. Machinery, livestock, growing crops, cash, mortgage and other debts should be listed and valued as well as land and property assets.

All those involved need to think five to 10 years ahead and take a step back; enabling an objective understanding of the aims and ambitions of different individuals and the pressures they are under. 

A successful succession plan puts the right people in the right place at the right time, allowing family members to meet their own ambitions. It identifies problems and provides alternative solutions.


Providing for each group and generation – one successor per business

The next step is to start to understand what those involved want and need from the business and the property. The biggest obstacle will usually be how to provide for a retiring generation and/or non farming family members. Balance is needed between the needs of the business, the needs of the retiring members and the ability to use farmland and assets to gear-up for investment in non-farming ventures.

Once everyone’s objectives are clear, consider whether to keep things together as one business or to split different business interests.

For businesses with development or potential development land, or a diversified business, there is greater flexibility to provide for non farming family members, through gifts of residential or other property, or by their taking on an alternative enterprise.


‘Cost of starting is too high’ – ‘If there is a split we will lose what we have built’

Consider separating land from the business; land can be owned by several family members, but not all need to have a direct input into the farming. Successors could take over management, with heirs taking on ownership of assets. Successors and heirs can be the same people but not necessarily. 

Flexible business structures such as partnerships, contract farming and more recently joint ventures offer greater flexibility in terms of how to trade and farm. Contract farming agreements or FBTs can allow those not directly involved in the farming business to earn a return from the farm and occupation of land and/or use of farming assets can be limited to a number of years, or to a lifetime. 
Partnerships offer the most flexible trading structure for most family farms, allowing shares and rewards to be changed by agreement between partners. A new partner can be introduced without assets having to be transferred at the same time, allowing a gradual approach to be taken.

Handing over control – total or partial
 
Assets do not have to be given outright, they can be transferred in stages by gift or sale to family members, but remember lifetime gifts are only exempt from Inheritance Tax if the giver survives seven years.

Tax
 
There are important tax considerations which also have legal implications that should be considered as part of succession planning. Ownership should be clearly established and then reviewed to see whether assets should be held differently for a better tax outcome.
With farmland qualifying for 100% Agricultural Property Relief (APR) from Inheritance Tax (IHT), there is little tax incentive to pass on assets while the giver is still alive. Despite frequent warnings, many families still risk loss of Agricultural Property Relief by leaving the older generation in the farmhouse and giving away or letting land. The new nil-rate band on farmhouses may assist and be a better way of dealing with the house, leaving a simply FBT option on land.

Passing on qualifying assets on death usually also has a Capital Gains Tax (CGT) advantage compared with moving the same asset during lifetime, especially if land or buildings were to be sold in the near future.

Documents
 
Wills, partnership and shareholder agreements must be relevant, up to date and reviewed regularly. Old, out of date or poorly drafted documents can be just as problematic as no Will or agreement at all.
Wills should be drawn up alongside restructuring plans, remembering that both marriage and divorce revoke a will. Wills should also deal with entitlements, otherwise they form part of residue of estate and could end up in hands of a party with no land.

All asset transfers should be properly documented and relevant authorities notified, including your bank. Partnership Agreements should match what is actually going on and issues such as termination of the agreement, retirement of partners, death, mental incapacity and dispute resolution need to be addressed.
Pre- and post-nuptial agreements can be used to protect family assets. Co-habitation does not confer the same rights as marriage
 
 
For further information about succession planning contact Charles Meynell on 01785 273999 or email here
 



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A453 road widening from M1 to Nottingham

 
 
Work on long awaited improvements to widen the 7.5 mile (11.5km) section of the A453 between M1 junction 24 and the A52 Nottingham Ring Road completed last summer after a construction period of 2.5 years.
 
The major route between Nottingham, the M1 and Nottingham East Midlands Airport; the A453 carries up to 30,000 vehicles a day.

The previous single carriageway road was heavily congested at peak times and had a poor safety record. The &150 million widening scheme has improved journey times and reliability and provided a safer environment for all road users, but inevitably neighbouring land and property owners have been significantly affected by the scheme through land take, noise, vibration and other disruption.
 
Early involvement
 
From 2009 when the scheme was first proposed the Fisher German Compulsory Purchase team have assisted a wide range of clients affected including tenant farmers, owner/occupiers, commercial owners and residential properties to mitigate the effects of the scheme providing advice with regard to compensation and accommodation works as well as planning and taxation advice as appropriate.
 
Design proposal changes
 
Through our early involvement with the proposals for the road widening and liaison with prospective contractors and District Valuer services, regarding design of road layout and negotiation of potential accommodation works, we were successful in effecting changes to the design proposal; including provision of a secondary access to circa 288 acres of agricultural land that would have otherwise been serviced only by an overbridge (with limited width and weight restrictions).

In representing our clients Fisher German have been able to make what can often be a very stressful time for the landowner easier to manage, dealing with notices and on-site issues during construction, including agreeing final design and layout of accommodation works, from ditches and fences to private rights of way and private means of access routes.

Although the new road is now operational, Fisher German continue to negotiate outstanding compensation claims with the District Valuer Service supported by Highways England. Although the road is open to traffic, snagging lists in respect of restoration works and some accommodation works remain outstanding; for those affected by the scheme, the project will not be complete until these issues are resolved.
 
 
For further information about how our compulsory purchase team can help landowners contact John Ikin on 01530 410814 or email here
 



Conversion of agricultural building to residential use

 
 
 
Bloxhams Barn is a two storey stone building with a single storey brick, three bay, open fronted cart hovel. The building is in open countryside, surrounded by open arable land. Although no longer in use, the building has been well maintained to be wind and watertight and generally the building appears to be in good condition.
 
The owners of Bloxhams Barn had always hoped that they would be able to obtain planning permission for conversion to a residential dwelling, but three previous applications had failed (including at appeal), on the grounds of its open countryside, prominent location. However, when the Government revised the General Permitted Development Order (GPDO) to include the conversion of agricultural buildings to residential use, a perfect opportunity was presented to make a further application.

The design of the conversion submitted in the GPDO application hardly differed from that of the most recently refused application and local policy has not changed since that refusal in 2008. However, as a Permitted Development application is based on nationally set procedure, rather than local policy, this did not matter. Permitted Development is more of a case of making sure that the proposal complies with the rules set out in the order; if this is the case, the Local Authority is required to confirm that they do not require any further details of the works to be carried out, and therefore grant you their ‘prior approval’.

Although this sounds a relatively straightforward process, there are many potential pitfalls along the way. For example, the rules clearly state that the proposed development cannot result in the external dimensions of the building extending beyond the external dimensions of the existing building at any given point. In this case, the cart hovel and two storey building are not joined to each other. An obvious solution would be a small link extension. However, as this would result in an immediate ‘fail’, the two buildings were kept as two distinct units.
 
Unlike full planning applications, a Permitted Development application does not require the same level of additional detail such as environmental surveys, heritage statements and structural surveys (although some local authorities are requesting this information). The application contained:
 
  • A Planning, Design and Access Statement
  • Existing and Proposed Elevations and Floorplans
  • An Application Form
  • Application fee of &172
The application has a strict 56 day period in which the local authority must make their determination; a failure to respond within that time can be deemed to be acceptance on their part. Having submitted the application for conversion of Bloxham’s Barn, South Northamptonshire Council made very little comment on the application, save for the request to change the design of one window.
 
The application was approved without further question, thereby granting approval for the conversion of a building, which was initially applied for nearly 30 years ago. This shows that although the principle of the application had changed very little in that time, National planning policy has only now caught up with the idea of the proposal.
 
 
For further information contact Amy Hutsby on 01295 271555 or email here 
 



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