Right now, many producers are asking fundamental questions about the future. Perhaps this is an opportune time to do something different, helping the older generation to step back and mentor incoming new entrants.
There is plenty of rhetoric about the ageing farming population and barriers to entry for young farmers, giving rise to a perfect succession storm in the UK. It therefore seems sensible to consider whether the current business environment raises an opportunity for new entrants, particularly where business owners are looking to retire or change direction.
Traditionally many farming business have been passed down to the next generation or the land has been let out when there is no available successor. However, this has important tax implications from both an Inheritance Tax and Capital Gains Tax perspective. There is also a practical impact – simply letting the land can mean a very experienced farmer retires without passing on their years of knowledge and experience of the industry.
This is where joint ventures really come to the fore. They are good for the industry in terms of bringing in new blood and marrying it with experience, and they can minimise the negative tax implications.
Formal joint ventures, such as contract farming or share farming agreements, can be structured to benefit all parties, aligning their interests and creating a sustainable and profitable business for the longer term. By pooling expertise, skills and enthusiasm, the landowner can coach and develop the new entrant, while benefiting from a fresh perspective.
Dan Knight is a director of accountants Old Mill.