Reaping what you sow: Conquering agricultural tax

As rewarding as farming may be, it can also be an all absorbing and relentless business. In between carrying on their daily farming operations, it is often a challenge for farmers to keep up to date with all relevant agricultural legislation changes while, at the same time, grappling with changes in government support, volatility in the supply chain, and the obstacles posed by local and national government agencies. As agricultural tax experts, we, at Evelyn Partners, are in a position to provide advice that takes such issues into account as well as focussing on the more strategic matters faced by nearly every agricultural business or farm owning family. Common areas of concern include those described below.

Every farming family is unique in its values and composition. However, one commonality that is always present is managing the inheritance of assets and the equitable division of the value that sits in the business; whatever it may comprise, while, at the same time, preserving the integrity of the business as it passes down through the generations.

When planning to share assets, or make gifts, between generations, Capital Gains Tax and Inheritance Tax implications both require careful consideration albeit very much secondary to getting the right family wealth strategy. Capital Gains Tax arises on a disposal, by sale or gift, of all kinds of property and possessions, including business assets, although there may be reliefs available for gifts of pure farming assets and other assets used in a business. Transfers of non-business assets require careful planning as they may generate a tax charge without any means of paying the tax. 

There are various ways to mitigate this risk. One is the use of discretionary trusts and others could also involve making the most of farming partnerships because they are very flexible business structures, which allow for assets to move around within families.

Diversification has become an increasingly important tool for farmers and estate owners to unlock additional revenue streams to future proof their businesses. However, many diversified farm businesses have left themselves exposed to paying more by way of capital taxes than they need to because they haven’t considered the tax implications of adapting their business.

While diversification is a sensible form of long-term financial planning and good asset management, it can, without careful planning and appropriate tax advice, have a detrimental impact on the availability of valuable Inheritance Tax reliefs – in particular agricultural property relief and business property relief. To ensure eligibility for both tax relief opportunities, I would recommend conducting regular reviews to rebalance a farm or estate’s business model to ensure that it remains predominantly a farming business and that it doesn’t stray into becoming mainly a business of holding investments – or at least if does adversely affect the composition of the business the relevant activity or business interest sits in the right generation’s ownership.

For any farmer, particularly those who have recently diversified, I would encourage regular discussions with your accountants, solicitors or land agents to ensure an accurate record is kept of changes to the business so that any necessary adjustments can be made in plenty of time to protect investments.

Evelyn Partners is very well placed to advise you, with your other advisers if relevant, on the most appropriate arrangements dependent on your individual circumstances. Get in touch for further assistance: richard.crane@ashcroftllp.com

Richard Crane has been leading advisory teams in the industry for over 25 years, before joining Evelyn Partners he was a partner at Ashcroft Partnership and prior to this at Deloitte for 17 years, leading their Cambridge food and agriculture practice. Richard is vice chairman of the Cambridge CLA committee and has become increasingly involved in a

We spoke to Danielle Dewe, the Managing Director of the Countryside Regeneration Trust (CRT), a farming and wildlife charity headquartered in Comberton, Cambridgeshire about how her team of volunteers, staff and trustees have collaborated to diversify and modernise a dairy farm to benefit British wildlife. 

“We were gifted Pierrepont Farm, Farnham, Surrey in 2006, a 200-acre working dairy farm with a herd of Jersey cows. In 2011, with support from the Heritage Lottery Fund (now National Lottery Heritage Fund), a brand-new state-of-the-art dairy with robotic milkers was installed. This left the old dairy buildings empty and after five years they had fallen into disrepair and were no longer suitable for agricultural use.

This was an opportunity that couldn’t be ignored, we restored the beautiful Grade II listed buildings in 2016. The converted Old Dairy is now a series of characterful business units and barn, with modern facilities, clustered around courtyards, next to the River Wey.  These unique spaces host a variety of artisan food and craft businesses, including a brewery, furniture restorer, designers and illustrators, and makers of jewellery, silverware, cheese, fudge and chairs.

The additional rent income is providing necessary funds for the charity to complete conservation activities on the farm, such as planting new hedgerows, creating a wildlife pond and setting aside wild spaces to help a wide range of flora and fauna to thrive.

The stunning location and quirky spaces have proved very popular with the local artisanal community. There is such a long waiting list for the current spaces that the CRT has just submitted a planning application to convert the final building into six new units. The charity was left a very generous legacy that is funding the construction works so when rental income is received it can be used for more conservation activities.

The tenants of the commercial units and the tenant farmer work happily alongside each other and The Old Dairy has become a hub for the local community. There is a real buzz about the space with people walking, cycling, horse-riding or driving to the farm, staying for a pint of beer and picking up some cheese and fudge to eat on the way home. The CRT regularly runs events at Pierrepont Farm and has become an important part of the Surrey rural economy.

For the last 30 years the CRT has been dedicated to regenerating the countryside and reversing the decline of farmland wildlife caused by intensive agriculture. On Pierrepont Farm, and our other 16 properties across the country, we are proving how nature-friendly farming benefits us all, by enabling us to produce food more sustainably and helping a wide variety of species to flourish. We also teach current and future generations about the relationship between farming and wildlife and the importance of protecting our natural world. We offer a fantastic education programme at Pierrepont Farm called Mosaic, providing school trips to primary age children.

The CRT relies on our Friends, donors, sponsors and visitors to help us protect, promote and regenerate our land and all life on it. If you’d like to find out more about the work we do please visit www.theCRT.co.uk, or get in touch - we’d love to hear from you.”

Danielle was appointed CEO of the CRT in 2021.Her role is to develop the overall strategic direction of the CRT and to oversee the operations of the Trust. Most recently this has involved steering the CRT through an intense period of change management across our multiple sites. Working with the support of the Trustees, Danielle has managed to revolutionise the team and has started to direct the CRT to where it needs to be. Danielle is also responsible for the management of the CRT's property portfolio in conjunction with the Property Team, all Governance, Fundraising and Communications, People and Culture.