Farmers in the South concerned for the future
The fourth in a series of agricultural surveys conducted by West Sussex and Gatwick-based chartered accountants, Carpenter Box, in conjunction with MHA, the UK-wide group of accountancy and business advisory firms, reveals that for the majority of farmers in the South there is less optimism about growth, which is unsurprising given the current dairy crisis and the falling lamb market. The survey also suggested that succession planning has become even more of an issue than was the case a year ago.
The Agriculture Insight Survey was conducted at Cereals 2015 in June and compares this year’s findings with those of 2014. It takes into account the views of more than 150 farmers nationwide.
Key findings include:
• Fuelled perhaps by falling prices, optimism for growth in the region has fallen by 10% over the last 12 months. Despite this it remains high with 59% of those who responded expecting growth. • Expansion is an aspiration for many, with 66% planning to increase their acreage compared to 59% in 2014. • 72% of respondents in the south are concerned about succession planning, which is an increase of 7% over last year.
Alison Aggleton, Agricultural Tax Adviser at Carpenter Box, commented: “The survey has shown a remarkable degree of resilience or even optimism in the south, given the lower level of arable prices. Normally falling cereal prices tend to help livestock producers but we are currently seeing revenues falling in every sector.”
Aggleton added: “The reduction in the Annual Investment Allowance (AIA) from £500,000 to £200,000 from January 2016 announced in the summer budget, (which of course took place after this survey), provides a much needed level of stability to plan capital expenditure and obtain immediate tax relief – although given the current concerns about cash flow farmers might be limited in maximising their use of the current higher level of the allowance by 31 December.”
“The prospects are for a late harvest this year and coupled with uncertainties over the timing of support payments, we are expecting cash flows to come under pressure. Lenders are well aware of this, but farmers should be consulting their accountants at an early stage, with a view to keeping bankers advised over the autumn, and above all avoiding surprises. It is always better to ask for a facility a couple of months before it is needed rather than the day the overdraft limit is breached.”
Farmers looking to expand are concerned about finding available and affordable land in the South East. The Carpenter Box Rural Business team are seeing increased diversification across the region as farmers look to grow their businesses in other ways and seek to manage the volatility experienced in their farming enterprises. For those looking to increase their farm size or diversify their activities, planning for the future of the business is a growing worry for many. Of the 72% who stated that succession planning was a concern, 16% explained that it was a ‘great concern’.
Of those surveyed, a significant 75% would consult their accountant when making decisions about their business. Sound financial advice is essential – whether a farmer is planning to expand or looking to hand over the reins to the next generation. Aggleton advises: “Whilst diversification is commercially attractive, the nature, structure and size of such concerns should be carefully considered and monitored to ensure that the availability of tax reliefs are not unnecessarily jeopardised”. The increases to Inheritance Tax allowance limits announced in the summer budget also make it more important than ever that Wills and succession plans are looked at now with some urgency.
Agricultural accountants are well placed to comment on both the practical and taxation aspects of the business, as well as provide an independent assessment of the business.
This was posted in Bdaily's Members' News section by Colin Bridgman .
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