By Casey Gilroy & Phillip Bolton
Farming is a unique and vital practice with benefits that span from farming families to the wider public and the environment. Succession planning is crucial to ensuring your farming legacy passes to the next generation in the most tax efficient way, with minimal disruption to both your business and your family.
Topics to be answered in this article
What does “Succession” actually mean?
Succession planning allows you to plan for all areas of your business, from the day-to-day running of the farm to your long term plans and ambitions. It is not just limited to death or retirement, but good succession planning will ensure that those eventualities are as seamless as possible.
How to start the discussion
It is not always the case that your family members will be in a position to carry on your business, so it is important to explore all avenues of keeping your legacy alive. You may already have a business partnership, in which case drawing up a partnership agreement, or being advised on the terms of your current agreement could be essential to ensuring your wishes are met on death. It is also important to explore the other ways you can provide for your family on death if they do not wish to take on the business.
On the other hand, your family may want an active role in the business, and we can help to ensure they are given roles that would suit their lifestyle, while still ensuring the business needs are met.
It is crucial to have conversations with your loved ones, and business partners, to ascertain the level of involvement they wish to have in your business.
What needs to be in the succession plan?
Your succession plan needs to cover a whole array of points and below is a non-exhaustive list of the areas in which our lawyers can help you plan for:
- Long term direction and vision for the farm
- How the farm assets will be owned
- Use of the land, buildings and major assets
- What family members want and need from the farm overall
- What roles family members will have in making the plan happen
- Any open-ended options or future possibilities
- Timescales or triggers within the plan.
- How to provide for family members that do not want an active involvement in the business
- How your farm land can benefit the planet and society
Tax considerations
Inheritance tax is currently charged at 40% on your taxable estate (unless you qualify for the reduced rate of 36%). We understand that this may mean you have a large tax bill upon death. Our lawyers are here to establish the extent of your estate and look at ways to minimise your inheritance tax liability. We will explain the standard reliefs available to individuals as well as advising on more complex tax reliefs that may be available to you and your business, such as agricultural property relief and business relief so that you are aware of your inheritance tax liability and can take measures to minimise this.
Our lawyers can also assist with advising on your capital gains tax liability and the allowances available to you, enabling you to make informed decisions when acquiring, or disposing, of assets.
Protecting the family assets
There are many life events, other than death, that could affect your business, including long-term illness, marriage or the breakdown of a relationship. Our experienced lawyers can also assist you with:
Wills: Ensuring a seamless transition for your beneficiaries.
Lasting Powers of Attorney: Ensuring someone is there to assist you with your property and finance, and health and welfare decisions, should you be unable to in the future.
Business Lasting Powers of Attorney: Ensuring someone can assist with your business property and finances should you be unable to in the future. It is an important distinction as your personal attorneys may not be best placed to assist in farming decisions and therefore you can appoint different individuals to act as your attorneys in your personal and your business affairs.
Trusts: Protecting assets and being specific about what is to happen with those assets.
Prenups: Ensuring business assets are protected in the event of marriage.
Partnership agreements – ensuring your agreement covers what is to happen to the business in the event of death, to ensure it can go in line with your wishes and ensure a smooth running of the business during your life.
Pensions and other investments
The use of trust funds and SIPPs and many other mechanisms can provide you with future support and stability when you choose to take a step back from your farm.
Last year, pensions were identified as one of the most important financial management priorities for farmers; as many farm owners do not have a traditional workplace pension it is vital to ensure you find a future plan that works for you.
For example, a SIPP (self-investment personal pension) can provide you with the opportunity to buy and invest in UK commercial property meaning you could buy the business premises you are already currently occupying and benefit from a rental payment from the new tenant(s). This is just one of the many potential options available to you.
We can work together with your financial advisors to determine what the best option would be for you, and your business.
Making the plan work
It is important to make sure that everyone involved in your vision is also in agreement with their roles and the plans for the future. You should consider an annual review of the plan and get regular property and business valuations to ensure you are maximising the tax advantages available to you. Personal circumstances, and the economy, change often and it is crucial to review your plans regularly.
How Goughs can help
There are a lot of considerations when crafting a succession plan and our experienced trusted advisors can help make the process as simple as possible for you. We are here to listen to your concerns and wishes, and provide expert legal advice to ensure your farming business can continue to excel.
Please get in touch with a member of our agricultural and rural land team if you have any questions about succession planning.
Author Bio
Casey Gilroy
I studied at Swansea University for four years, obtaining a first-class degree in law and a Masters degree with distinction, before joining Goughs to commence my training contract in 2022. I trained in various departments at Goughs before finding my place in Private Client and qualifying as a solicitor in 2024.
Author Bio
Phillip Bolton
I studied at BBP Law School in London following which I completed my legal training and qualified at a London firm. Following my qualification, I moved to a well-regarded regional practice before joining Goughs in May 2013. I joined Goughs as a Solicitor and rapidly progressed to Associate and then Partner in 2016.
