With the loss of the Basic Payment Scheme (BPS), income generated through diversification has become a vital component of many farming businesses.
Leading rural and private client specialists are warning that careful planning and professional advice are now more important than ever.
Philip Whitcomb, a private client lawyer who specialises in agricultural clients at national law firm Clarke Willmott LLP, says farmers must take a structured and strategic approach before embarking on any diversification project.
He said: “For many farming businesses, diversification is essential to replace lost BPS income. However, diversification must be properly planned. It affects not just cashflow, but succession, taxation, risk exposure and the long-term resilience of the farm. Getting the right professional advice at an early stage is critical.”
Philip Whitcomb advises that farmers considering diversification should follow a comprehensive 10-step framework:
1. Identify the asset and strategic priority
Determine which asset is suitable for diversification and how it aligns with the overall vision and long-term strategy of the farming business.
2. Assess planning requirements
Investigate whether planning permission is required and identify any planning constraints that may apply.
3. Evaluate financial viability
Undertake a robust financial appraisal to ensure the project is commercially sustainable.
4. Consider integration with the wider farm business
Assess how the diversified activity complements, or potentially conflicts with, existing farming operations.
5. Secure appropriate funding
Explore funding options, including available grants, private investment or borrowing facilities.
6. Review business rates and revaluation implications
Consider whether diversification will trigger revised rateable assessments and how this impacts overall profitability.
7. Decide who will operate the business
Clarify management responsibility. Will family members, external operators or new hires run the project?
8. Align with succession planning
Ensure the diversification strategy supports long-term succession objectives and does not inadvertently complicate inheritance planning.
9. Update insurance cover
Review existing policies and determine whether additional insurance protection is required.
10. Mitigate personal and business risks
Assess exposure to risks arising from death, bankruptcy or divorce, and ensure appropriate legal structures are in place.
Philip, who acts for a large number of farmers, landowners and high net-worth individuals, adds: “Diversification can strengthen a farming business significantly, but without careful legal and financial planning it can also introduce unintended risks. Farmers should take a holistic view considering tax, succession, asset protection and governance alongside commercial viability.”
As agricultural support structures continue to evolve, professional advisers are encouraging farmers to take proactive steps to safeguard the long-term sustainability of their businesses.
Posted:
