How to succeed at succession in a Covid-19 world - by Catherine Lawson, Land Agent
Ask any farmer or landowner why they are so motivated to look after their land in the way that they do and somewhere near the top (if not at the top) of the list will be their desire to keep the farm or estate in the family for future generations.
So why, when it comes to succession planning, do the conversations dry up?
While most family farms wish to keep the business within family, planning who will own and deal with farm assets when the head of the family dies is perceived as an awkward conversation that is all too often avoided until it’s too late.
That’s why we need to change the mindset of what exactly ‘succession’ means. Succession is not about retirement, or even death, but simply a sensible part of your long-term business plan. Something written down after careful discussions so that it’s clear to everyone involved how and by whom farm assets are owned or dealt with on death.
Establishing a succession plan, can avoid disputes, help secure tax benefits and, most importantly, keep the farming assets together.
Having the initial conversation is often extremely difficult as mixing business and personal relationships can be tricky to navigate and upsetting family members is a very real fear. But the alternative is worse, and we all know stories of families being torn apart from the upset of not getting what they thought they would both prior to a death and sometimes afterwards as well.
One of the key factors that drives succession is the likely tax treatment under Inheritance Tax (IHT) and this is where advance planning and working with the right professionals can save money.
As the government looks to balance the books after unprecedented levels of spending during the Covid-19 pandemic, there is some concern for the longevity of Agricultural Property Relief (APR) and the current personal inheritance tax threshold of £325,000.
Without an effective succession plan, not only will rural families be burdened with the stress of sorting out the affairs of the deceased but, if rumoured changes take effect, potentially they could face a tax bill of 40% of the value of the estate above any threshold figure. This means the need to start planning for the next generation’s future and your own tax bill has never been more pressing.
So, where to start?
Quite simply, the first step can be as easy as picking up the phone to your trusted team of advisers including your land agent, lawyer and accountant who can work with you and your family to offer a range of different expertise and perspectives. Together the team can find practical and financial solutions to suit the family, creating transparency about the future and putting everyone’s minds at rest.
If a review of likely market values has not been undertaken on all the aspects of your property in recent years, it could be that this is the first essential – the figures will give a good guide to the potential tax bill and then the professionals can review how to manage that most effectively.
Bell Ingram valuers are up-to-speed with their local property market from sales, purchases and valuations and we are used to reviewing all the elements of a client’s farm or estate – from cottages to land, to forestry or renewable energy projects.
Familiarity with other local professionals is also key, it is important that your accountant and lawyer also understand the possible options available to make rural tax planning effective – to secure available reliefs, transfer the ownership as desired and assist in ensuring that the business has a sound future. If your legal/tax adviser is not a rural specialist, then we can advise you of local contacts who have the particular expertise you need.
In the wider picture, this planning exercise might also involve funding for a new owner if siblings or other relatives need to be “bought out” to try and ensure fair treatment or if new ideas demand capital – and it is here that AMC finance might be the final piece of the jigsaw that makes a plan workable.
Looking at all the property and people interests in the round, both now and with a bit of future proofing, really does help all involved secure the succession plans they would like – hopefully with no nasty surprises.
The Bell Ingram Rural Land Management team valuers and AMC agents are happy to discuss your succession requirements or answer any questions.
For an informal initial discussion in complete confidence contact our key rural contacts: