Posted on 2.9.15 by Tasoula Addison
Current research has shown that many farming families find it difficult to initiate a conversation about succession. In many cases, a lack of dialogue and inadequate planning can hold farming family businesses back.
What exactly is succession planning? One way is to think of it as a long-term process where a family plans for the transfer of ownership, management, assets, knowledge, skills and labour from the retiring generation to the successor generation to help the preservation and continued success of your company.
The Hurdles to Planning
One of the main reasons such families avoid these conversations, is to avert from a looming family conflict. Succession planning involves the consideration of very emotive subjects, not only death, but also how to protect against the potentiality of future divorce and bankruptcy of the individuals involved. Rather than think about these not so pleasant scenarios, families would often rather put them off.
A further hurdle to planning is that different generations often have very differing approaches, not only to successional planning, but to how the farming business is run, which often leads to a reluctance from the older generation to pass over control.
Overcoming the Barriers
One of the biggest helps for farming businesses to plan successfully is to involve everyone that needs to be from the earliest stage possible. All key members should be encouraged to be as open as possible, including those who could potentially be affected by the decisions being made, such as spouses and children.
Getting everyone involved from the outset means that concerns can be voiced early, which can then be acted upon, whether it is adjusting plans accordingly or putting these concerns to rest. Families often assume they know what everyone’s opinion will be before they’ve even heard it. Not surprisingly, this can create huge problems when people’s actual opinions are revealed! Keeping records is a good way to demonstrate why certain decisions have been made in a particular way and can help to provide evidence when the opportunity arises.
Starting a conversation can be more difficult than it sounds, as can maintaining an amicable discussion. Intermediaries can be invaluable in helping to focus discussions and take a little heat out of potential situations. Using professionals, such as solicitors and accountants, can make sure any plans being made are viable for a legal or financial perspective. Seeking professional help early ensures that valuable time is not wasted on plans that are ultimately impractical, or have unintended tax consequences. An independent individual can also take an objective viewpoint and may be able to see solutions to problems simply because they don’t have a vested interest in the plans.
Benefits of Planning on Tax
Planning early can also have extra benefits when it comes to tax. The earlier the planning process begins, the more options and opportunities there are from a tax planning point of view, including structuring the entire business in a more tax effective way.
For farming businesses in particular, it is a priority to maximise the availability of agricultural property relief and business property relief. It is possible to inadvertently lose these valuable reliefs due to the way in which assets are structured, but taking advice at an early stage avoids falling into a trap which could ultimately lead to a tax bill running into hundreds of thousands of pounds.
To get the ball rolling on succession planning for your farming business or to have an initial chat with an expert solicitor in this field, get in touch today. We will be able to give you specialist advice when it comes to the future of your business and benefiting when it comes to tax. Give us a call on 0343 507 5151 (included in mobile minutes), send us an email to firstname.lastname@example.org or fill in our online form and we’ll get back to you when it is more convenient.