Succession planning is an especially sensitive, but utterly vital issue for farmers. John Robson, a director of Robson & Liddle, discusses some of the main considerations.
Recent government figures show the average age of a farm owner is over 65 (and it’s been thus for as long as I can remember) suggesting that succession planning is not being addressed as early as it could be.
The reasons for this are entirely understandable. Parents are often reluctant to hand over control of the farm they have nurtured and developed over a lifetime, and in addition, the competing ambitions of grown up children make open and honest discussion difficult, particularly if this means placing one individual at the head of the business against the wishes of others.
Why succession planning must be addressed now
Experience shows that the sooner a succession plan is put in place, the better for all concerned. Everyone involved in the succession process should be included in the discussions, which ultimately shape the strategy. In this way misunderstandings can be ironed out and individuals assured that their views are heard.
Conflict resolution is often an unavoidable part of the succession plan and professional advisers can be effective as both an objective sounding board and an even-handed facilitator of meetings.
Using a business plan to drive the succession process
Of course there can be no succession unless the business is viable in the long term, so the first step is to evaluate how it is performing. Few in farming circles would deny that we are going through challenging times. There is a massive temptation to shelve long term planning until better times but in fact these difficult times make sound planning essential rather than optional.
If you don’t already have a business plan, drawing one up will create a valuable management tool, as well as a solid foundation for a succession plan. Again, professional advisers can be brought in where technical knowledge is required.
The business plan enables those involved to identify the business’ strengths and weaknesses, as well as to decide what needs to happen to move it in the right direction.
The importance of clarity on roles and responsibilities
Farmers are no different to other business owners in that they need to consider their exit route and plan many years in advance for the process to run smoothly.
So it is essential to be clear about the roles, responsibilities and objectives of successors as soon as possible. Ideally, by the time a farm owner approaches retirement, he or she should have become redundant – but in a good way.
This means gradually, but progressively delegating operational control to the next generation management team. I do know of farmers who hold on to the cheque book for many years after the successor is in place!
Why a succession plan needn’t be overly taxing
While the tax ‘tail’ should never wag the business ‘dog’, careful tax planning and advice has never been more important than at this point. It ensures farmers can maximise the various tax reliefs available and exit their business in the most tax-efficient way possible.
There is a tendency for the farming business to drift in later years. For the farm or estate to survive, almost intact, for the next generation, then that drift cannot be allowed to happen.
For advice on succession planning on the farm, or any other rural land and property matter, call John on 01768 254 354.