Don’t delay in tackling family farm succession, says CLA conference
- Credit: Archant
The younger generation and the in-laws should all be involved in succession planning if farmers and landowners want a successful transition, a conference was told this week.
The Country Land and Business Association (CLA) hosted a succession planning event at Elveden Village Hall near Thetford on Wednesday which sought to dispel some of the myths around succession and encourage delegates to communicate with their families on what can be a difficult and sensitive issue.
More than 100 farmers and landowners attended, to hear from a range of experts about the best approach, and from younger people who gave an insight into their personal experience of the issues they had found in shifting the emphasis from one generation to the next.
Younger generation case studies included sisters and entrepreneurs Lucy and Emily McVeigh of Kenton Hall Farm, near Debenham, James Harris of T G Harris & Son at East Bergholt, Robert Rendall, a group director at Boxford Group Farms at Stoke by Nayland and grandson of the late fruit farmer and businesswoman Devora Peake, and Emily Norton of Nortons' Dairy near Norwich.
Speakers Louise Speke, the CLA's chief taxation adviser, Michael Mack, farm and rural business consultant at Smiths Gore, and Rachel McKillop-Wilkin, senior associate at Birketts Solicitors, helped to unravel some of the many complexities involved in planning for succession, including the financial, legal and emotional issues which surround it.
They underlined the importance of starting a discussion, choosing neutral venues and involving parties such as non-farming siblings and in-laws in talks to avoid the pitfalls of poor succession planning.
Chairman Viscount Coke of Holkham Hall in north Norfolk stressed the need to talk about the future and explained how succession planning had worked within his own family.
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'I'm very lucky. I succeeded my father eight years ago. He was the first member of my family to move out of the big house on two legs, rather than in a box and that was very far-sighted of him,' he told delegates. 'I still sometimes get the odd broadside from him, but generally they are manageable.'
Mr Mack said that with an ageing farmer population, succession was 'one of the biggest issues in British agriculture'.
He asked the audience whether it was fair to give your children just a few minutes' notice, on your death, that they are going to take up the family business. He advised starting the succession process early.
'Leaving succession planning alone and not dealing with it can have such a bad effect on your business and on your family,' he warned. 'By starting the process it doesn't mean you have to walk out the door and have nothing to do with the farm.'
He split the process into four stages which could take up to 15 or 16 years or so - planning, commitment, establishment and withdrawal - and explained that the next generation also had a duty to prove itself before any handover through obtaining skills and getting involved in the business.
The establishment period was generally 'a golden period' for many farmers, with the two generations working in unison. As a result, many businesses did particularly well during this stage of succession, he said. 'I think that's a lovely opportunity if you can get that right,' he said.
'Definitely the hardest part is the withdrawal. This is when the older generation steps out of the business.'
The principal farmer could be 'scared of getting it wrong' and this created a barrier to progress on succession, he explained. He advised against forming 'little clusters' as it could make those not involved feel they were not valued.
'If you can't resolve the conflicts, bring experts in to help you,' he advised. 'Everything you are trying to do here is about building relationship within the family.'
Ms Speke said the CLA received 'an awful lot' of queries about succession planning, many from people in their mid to late 70s, and it was important to plan early, particularly for tax purposes and around areas such as lifetime gifts which the donor must survive by seven years.
She said it was best to have your advisers with you when deciding what to do at the family meetings. Exceptions for farmers such as Agricultural Property Relief (APR) were not a given, and issues such as value above and beyond the land's agricultural value and whether the land in question was 'farmed' in accordance with what the Inland Revenue required needed to be considered, she warned. For example, grazing horses does not count as an agricultural activity, she explained. Farmhouses, who occupied them and what they were used for, also needed to be looked at, she said.
'Don't assume you are automatically going to qualify (for APR),' she said.
With composite businesses, involving farming and non-farming activities, it was important to run a 'Balfour' test with the help of an adviser every time there was any change, she warned.
Ms McKillop-Wilkin said there was no 'one size fits all' approach to succession.
'It's difficult to navigate your way through,' she admitted. 'You have to find what's good for your family.'
It involved identifying a successor and ensuring that they were willing and able to take on the responsibility. She advised that anyone critical to the business should be involved in discussion. She looked at pre-nuptial and post-nuptial agreements, as well as trusts, wills and contract farming and share farming arrangements.
Mr Harris, the fifth generation to join his family's farm business spanning East Bergholt, Assington and Lawford, Manningtree, which is run through a partnership agreement. His grandfather, now 86, handed over the running of the business to his father 15 years and he himself, an only child, returned home from university 10 years ago. Seven years ago, he became a member of the partnership and four years ago his father, now aged 57, decided it was time to start succession planning.
'It's a difficult subject to talk about, but we have managed it,' he said. 'We certainly don't want it to end with me, or before it gets to me.'
He added: 'My wife and I have a five-month-old daughter. We will have to cross that bridge one day.'
Ms Norton, who has a law degree, said her family's 150ha mixed farm, including dairy, involved some full-time family members in the partnership, all of whom loved what they did. She was the only one out of three siblings involved in farming, she explained. But her issue was in 'finding my place in the business'.
'I don't fit, basically,' she said. 'Trying to work out now where I fit into the business is part of my ongoing challenge.'
Communication was important and the family held a meeting every two weeks at which everything was discussed, she said.
'Everything is on the table and we all know where we are. It can be incredibly painful,' she said.
Emily McVeigh, runs a glamping site and food hub on the family farm, while sister, Lucy, is involved in the farm and is studying at the University of East Anglia, said their ideas were normally discussed over morning tea. A number of family members live on the farm, and the sisters, aged in their 20s, have two other siblings. The pair keep their individual businesses separate, they explained, and get on very well.
Mr Rendall, whose mother, Susanna is a key figure in the family business, is the third generation involved. There are five in the second generation, 12 in the third, and 16 so far in the next. He said with five branches of the family, it was important to communicate and there were two family council meetings held every year, and a big family party once a year. The diverse business includes a farm, hotel and golf course and various other elements.
'We very much have a corporate structure,' he explained.
The family employed the Peter Leach partnership to help them as they move into the third generation of the succession.
'Our fundamental basis is we are an equal opportunities family,' he said. 'We absolutely believe in fairness to a fault.'
They came up with a custodian model for the business, where each generation runs the business for the next. There's a family constitution and family members coming into the business are rewarded.
'We basically are all going to end up as minority shareholders of a business,' he said.