A future for small family farms in the UK?

Is there a future for small family farms in the UK?  That is the subject of a report commissioned by the Prince’s Countryside Fund and the answer appears to be yes for some but life will continue to be tough for all.

One of the questions we need to address first is whether the survival of such farms really matters. Certainly advocates of small family farms make a strong case for the positive contribution they make in local communities and the environment.

The report explains that the relationship between farm size and the environmental and social benefits they may bring to the countryside is highly complex.  As a result, in some instances where farm size, farm type and the farmer’s attitude and behaviour all interact favourably, this can result in a very positive role for small farms  - but by implication this is not always the case. 

The report also highlighted how complicated it is to even define what a “small family farm” is because the term encompasses a whole range of structures from retirement holdings, lifestyle farms, part-time farms to “main living farms” and because of this variety there will be a range of futures for the different types.

The report recognises there is not necessarily a future for all small family farms and explains that there are powerful economic forces driving change in farm size and structure - and little can be done about this. However, the report does say there are initiatives that can improve the resilience of a small farm.

These include the need to improve farm management skills and performance through targeted and co-ordinated advice and training, some of which should be provided by farmers themselves, mentoring others to improve their skills.

Other important challenges include finding ways to shorten the supply chain so farmers can gain a larger share of the value of the end product, which is particularly important for small farms where there are limited opportunities to take advantage of economies of scale.

Also, there should be initiatives to encourage new entrants and this raises a whole variety of issues surrounding succession planning and helping older farmers to retire with dignity.

Overall the report highlighted there is no “one size fits all” answer to the challenges that face the huge diversity of small farm businesses dotted around the countryside. 

However, what was also clear is that these farms provide a very important role in the structure of our agriculture and wider rural communities whose loss would be a huge detriment to Britain.   

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Tax reliefs for farmers

Accountants are always advising farmers to manage their affairs carefully so as to be able to take full advantage of the potentially generous reliefs which may be available to them under the Inheritance Tax (IHT) regime.

However, according to Catherine Desmond of accountants Saffery Champness, the National Audit Office (NAO) is launching an investigation in to the misuse of Agricultural Property Relief (APR) and Business Property Relief (BPR), both of which are very important reliefs available to farmers which can reduce or potentially illuminate the need to pay IHT on death. But with an impending investigation by the NAO it seems inevitable that claims for such reliefs will be brought under ever increasing scrutiny.

Accordingly farmers are advised to review their farming business regularly to ensure any changes in farming structure, ownership or occupation do not impact on their potential tax liability.

For example recent changes in planning regulations may encourage some farmers to argue buildings are no longer in agricultural use but the flip side of that coin will be that the Revenue may look to claim such buildings have a value on which reliefs may not be available.

Similarly we will all have seen Solar Parks and other renewable energy projects popping up all over the place and it may be that these developments will change the IHT status of the land and possibly the wider farming business depending upon the scale of the project. Further, another popular device used by landowners, who want to be seen to be farming rather than letting land for IHT purposes, is a contract farming agreement whereby the landowner employs a third party to carry out the farming operations on their behalf. In simple terms arrangement involves the landowner/farmer paying for all inputs over and above the contractor’s charges and then the landowner/farmer benefits from the profits, or losses generated once the crop or other produce has been sold.

This exposes the landowner to the true risk of running a farm but in many cases, although the written agreement may be satisfactory, the reality on the ground may be very different with the contractor effectively “farming” the land while the landowner receives a payment which is more akin to a rent than profit. Such an arrangement may fall foul of scrutiny by the Revenue which could be very costly if this resulted in the value of the land being taxed at 40% rather than receiving 100% relief from tax under either APR or BPR rules.

So the message is that farmers who are growing older should sit down with the family and their trusted professional advisors to ensure they take advantage of any tax reliefs that may be available or are at the very least are appraised of the potential IHT liability if they were to die in a relatively short period of time.

This all seems quite sensible but very often families do not want to discuss the inevitable for one reason or another or professional fees are perceived to be too high and as a result such discussions may not take place until it is too late which in the worst case scenario may jeopardise the future of a family farm.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Badger/Bovine TB

In recent years I have become increasingly concerned by the effect TB is having on the welfare of our farming clients. Few people actually realise the emotional strain that is put upon families who have devoted their lives to farming, only to watch animal after animal test positive for TB in the knowledge that these stock, some of which may have been bred for generations, are now condemned to slaughter.

Farmers are often portrayed as being “hard” and “unfeeling” but in reality if you are to make a living out of rearing livestock you do need to have an empathy with your livestock after all if they are unwell they will neither grow to put on meat, become pregnant to provide lambs or calves nor produce milk. Thus the welfare of their animals is very important to farmers but they are also realists in that where there is life there is also death which is something the rest of society has, in large part, become sanitised from.

Despite this acceptance of death, the impact of the premature slaughter of livestock because of TB is often hard to handle both emotionally and financially. Farmers do receive compensation for livestock lost to TB but this is rarely sufficient to replace the livestock and goes nowhere at all to compensate for the additional costs and losses resulting from a TB breakdown such as additional feed required to sustain cattle that cannot be moved off the holding or the loss of milk production.

So, it was with interest that I recently attended a farmers meeting hosted by the Shepton Veterinary Group where Paddy Gordon, partner in the practice, spoke to a room full of dairy farmers all eager to learn how they can help reduce the impact of this devastating disease. Paddy who is a Cambridge graduate, part time lecturer at the Royal Veterinary College, winner of various national awards as well as a practicing vet is no intellectual slouch and he stated that the current policy of TB control is simply not working.

The disease has spread at an alarming rate in the last 25 years; in 1986 235 cattle tested positive in the whole of the UK while in 2010 over 28,500 cattle tested positive. Surely this is evidence enough that the current policies are not working. In Somerset, which has escaped the worst effects of the disease until the last 10 years, the number of new herd break downs increased from 34 in 2001 to 303 in 2010. Paddy Gordon estimated that in the last 10 years the number of herds under restriction has also increased from 2% to 15% in the county.

Paddy explained that farmers are sceptical about the accuracy of the TB test but he rebutted this assertion by explaining that the test is pretty accurate and the reason there are so many “false positives” is more likely to be because evidence of the disease has not become physically visible at the abattoir rather than the animal actually not being infected. Of more concern is that the test misses some infected animals at the early and late stages of the disease.

In fact Paddy thinks this is a significant issue which is why herds do need to be tested frequently to reduce the chance of cow to cow transmission. However he also went on to explain that however frequently the tests are carried out, if there is an external source of infection which is not being tackled the disease will never be brought under control.

In this respect, badgers have been identified as the primary wildlife source of the disease and recently the government has announced that it will allow badger culling in pilot areas. Paddy went on to address the assembled audience on the practicalities of doing this in the Shepton Mallet area. The theory is that if the badger population can be reduced by 70% in a minimum area of 150 sq Km then the disease will reduce in cattle by as much as 28%. By way of example, 150 sq Km would represent a circle around Shepton Mallet extending as far as Oakhill in the north and Ditcheat in the south.

It was recognised this would be both very controversial and a massive logistical task but many farmers are desperate to reduce the impact of this disease on their lives and would be willing to pay for the cull which would be carried out by trained marksmen. In the meantime many farmers are already introducing additional biosecurity measures, trying to exclude badgers from cattle buildings and feed stores but this is not easy because a persistent badger can get through a three inch gap and obviously when cattle are out to pasture this can be even more difficult unless we have mains electric fences around all fields which would no doubt also be unpopular with walkers and the like.

So, what can be done? Well Paddy Gordon’s view, which seemed to be accepted by those present was that in the short term a badger cull, alongside continued cattle testing is the only way of tackling the disease although in the long term an effective vaccine for badgers will ultimately be the answer.

I find it sad, having been involved in research in to badgers and bovine TB back in the late 1980s that the arguments over this disease have hardly moved forward since then which is probably why the disease has continued to spread. Therefore regrettably I think the time has now come for action on badgers although at the same time I think as much resource as possible should be focussed on the development of an effective oral vaccine for badgers because that will probably be the most effective solution to a problem that everyone would like to see behind us.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk