Taking my children to watch some cows being milked on the Isle of Man over Christmas brought home to me the fact that even smaller farms are now diversifying in some way, even if only into bed and breakfast or “stay on a farm” holidays.
Recent statistics produced by Savills’ Estate Benchmarking Survey reflect the perceived value of diversification in farming as a means of increasing the ability of farms and estates to weather the current pressures on farm incomes, and maximizing opportunities to generate income from non-agricultural assets and enterprises.
But while the Savills’ Survey relates to estates of over 1000 acres, one only has to look at a number of recent articles published in the Farmers’ Weekly as part of their series on Succession Planning in order to see how an increasing number of farming families have used diversification as a practical means of allowing different generations within the family to develop their own interests, ideas or even businesses within the “umbrella” of a single farm, even where those interests ideas, or businesses do not lie in farming itself.
There have been cases of farms where income from traditional farming is being supplemented with diversification by younger members of the family into cookery, wedding and events organisation, and glamping. This is in addition to the renting out of farm buildings to tenants for business uses unconnected with the farm itself, or diversification into renewable energy supplies.
Diversification therefore not only allows farms to be more resilient by adding additional income streams but it can also allow members of the family, who might not otherwise do so, to return to the farm after college or university notwithstanding that they have varied interests away from farming.
Whatever the proposed diversification, it is, however, advisable to seek professional legal advice on the proposals in order to ensure that structures and entities are set up correctly and that any tax implications and planning requirements have been considered. From a property law perspective, you will need, for example, to consider whether you wish to let out a farm building or field without security of tenure which would otherwise be conferred on a business tenant by the Landlord and Tenant Act 1954. This can apply even to a field let out to a riding school for the purposes of its business. Failure to serve a statutory notice on the tenant and to obtain from the tenant the necessary form of declaration prior to occupation might prevent you from taking back the premises at the end of the term without paying compensation to the tenant under the Act.
Similarly, in letting out residential premises you will need to comply with the regulations governing rent deposits and the new regulations requiring smoke detectors to be fitted on each floor of a property. There may also be issues of company or partnership law to consider.
Woodfines’ agricultural team can help with any aspect of your farming business, including any issues of proposed diversification, property aspects, company and commercial issues, and estate planning.
And as for the milking over Christmas? That farm belongs to an old acquaintance of mine. As my girls each put the clusters on a cow she was very relieved to hear that they wouldn’t be put off milk by a little cow muck which is always the worry, she says, whenever any of her “stay on a farm” guests come to watch the milking!