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Making way for the next generation

Applications are now open to farmers in England for a new Lump Sum Exit Scheme.  Those eligible have until midnight on 30 September 2022 to apply.

So how should farmers plan for their exit.

This new scheme was initially billed as a retirement scheme but it is open to applicants who want to leave the sector and take up a new occupation, as well as those wanting to retire.  This is also likely to be a one off scheme and not open to applications in future years.

You can request a forecast as to how much you might receive before making a final decision.

Payments will be calculated based on an average of BPS payments made for the 2019/20 and 21 scheme years which also includes young farmer or greening payments.  This figure will be divided by 3. If payments were claimed in Scotland,  Wales, or Northern Ireland the reference amount (which has a cap) will only relate to your English payments.

Your lump sum payment may also be reduced if you do not give up enough entitlements and this could happen where entitlements have been sold or leased out since the 2021 BPS was claimed.

Applicants may also want to apply for BPR in 2022 as well as the Lump Sum Exit Scheme in case they find they are not eligible or if the transfer of land can be completed in time.

If you have inherited all or part of a business from a farmer who claimed BPS in one of the years 2019 to 2021, that BPS claim history can be taken into account.

If two or more businesses have merged since BPS 2018, the merged business can ask for the BPS claim history of the original business to be taken into account.

This is clearly a complex issue and we are happy to work with your agents to help you decide the best course of action.

The structure of your farming business might also dictate whether taking a lump sum payment is worthwhile. If you farm is in a partnership or Limited Company there could be implications for the whole business with the other directors/shareholders prevented from claiming any subsidy in the future.

In general planning for your succession should start with a conversation with family members to discuss any hopes and ambitions they might have.  At this stage independent advisers can help you model how the business could look going forward.  If you decide to pass on the business and assets then you will need to consider a range of factors such as:

•  What each family member expects or needs from the farm assets.

•  How the assets of the farm are currently owned.

•  Who currently occupies any land and buildings and any agreements in place which cover this.

•  The future focus and direction of the farm business and the role the new generation will have in seeing this to fruition.

It is important to take specialist tax advice before any actions are taken to review both the Inheritance  Tax and Capital Gains  Tax implications of any decisions.

Other ways to protect the assets of the business and individuals going forwards includes making sure everyone has an up to date  Will that enables the succession of the business as planned, that Partnership or Shareholder agreements are in place.  Thinking personally, ensure pre and post nuptial agreements or cohabitation agreements are considered and used which can help to keep wealth and assets in the family if younger family members want to get involved.

If you are thinking about family members who don’t want to be actively involved in the farm business but you would still like them to receive a ‘fair share’ then holding assets (such as land and commercial property) in a Self-Invested Personal Pension (SIPP) is one option rather than selling assets off or taking out finance to provide a lump sum payment.

Finally, once you have agreed a plan and the time scale to allow for a hands-on handover period, consider how your advisers can also play a role in this transition to help the next generation truly succeed and hit the ground running.