Planning the succession of a farm business is something all farmers have to do, yet there’s often a hesitancy or difficulty in doing so. CPM speaks to the experts to find out the who, what and why of what should be considered.
“Succession is an important trigger for transformational change on farms.” Professor Lee-Ann Sutherland.
By Charlotte Cunningham
Succession in UK farming has long been one of the most pressing, yet least spoken about, issues in the industry. Despite the perhaps rather romantic idea of passing on a farm from one generation to the next, the reality is far more complex – tangled in emotion, legislation, and evolving business models – and made only more challenging by recent changes to the legal framework.
As family farms confront unprecedented economic pressures, technological disruption, and changing environmental regulations, the critical question emerges: how can agricultural businesses successfully transition between generations? And with more than a third of UK farmers now aged 65 or older, the clock is ticking…
Succession isn’t just about who inherits the land. It’s about leadership transition, business strategy, long-term viability, and often, navigating family dynamics, all of which were explored in detail during a recent webinar hosted by The Royal Agricultural Society of England (RASE).
PERSONAL ACCOUNT
As a sixth-generation farmer’s daughter, Professor Lee-Ann Sutherland from the James Hutton Institute gave both a personal and scientific perspective on agricultural succession and the importance of handing over the reins to the younger generation. “Younger farmers are the critical drivers of agricultural innovation. Statistically, they’re more likely to diversify, adopt new technologies, and bring transformative approaches to farming practices.
There’s also good evidence that farms with identified successors will invest for 10 years prior to succession. Successors will gradually be integrated into decision-making and are often keen to make their mark – to try something new. Essentially, succession is an important trigger for transformational change on farms.”
However, this potential is often stifled by structural and emotional barriers which can prevent smooth generational transitions. “Succession is messy,” explains Lee-Ann, drawing from both her academic research and personal family experience. “The path from one generation to the next is rarely straightforward, involving complex negotiations of family dynamics, financial considerations, and individual aspirations.”
So where exactly do farmers begin on this journey?
The legal complexities of farm succession is one of the most critical parts of the plan to get right, with potential catastrophes awaiting families who fail to properly document their business arrangements, explains Esther Woolford, litigation solicitor and partner at Clarke Willmott. “The fundamental challenge lies in the unique nature of farming businesses, where professional and personal lives are inextricably intertwined,” she adds.
To put this into context, Esther says there are a number of common scenarios which can be used to illustrate the impact and importance of having a proper plan in place. “So starting with if there’s no clear succession plan in place – and particularly common, no written partnership in place – then significant steps can happen for the business, such as joining a family member as a partner, or moving the farm onto the balance sheet of the farm accounts for good tax reasons. But without any clear terms agreed as to how to resolve differences, then you fall back on the Partnership Act 1890.
Although it’s a workman-like act, it’s archaic and as such, it doesn’t cover all modern scenarios which might arise between partners, warns Esther. “One key issue is making decisions and under the Act, if you’re going to make a fundamental change, then you require unanimity. And so of course, if you can’t get to that unanimity, you can get stalemate.
DISSOLUTION RISK
“In addition to this, once you’ve joined a partner to the business, if there’s no agreement about their exit then a common occurrence is that one partner will seek to dissolve the business. This means applying for a dissolution which results in the sale of all assets on the open market.”
Esther adds that this is important information to keep in mind. “What we commonly see is that people expect to just be able to buy out the share of the partner wanting to exit the business. However, absent agreement and having no partnership agreement in place, other partners have no right to buy out the exiting partner.
“We know that the default position under the Partnership Act is that the court will most likely seek to sell those farm assets on the open market, because this is seen as the only truly fair way of establishing value.”
Esther says that landmark legal cases have also demonstrated how promises made around the kitchen table can escalate into complex legal battles, with children who’ve worked on family farms for decades potentially claiming significant financial compensation through legal doctrines like proprietary estoppel.
“This is a doctrine of equitable law which means if a promise or representation has been made – commonly to one of the farming children – that they’ll be able to take over the farm one day and they’ve relied on that to their detriment, then the court might order that an equity has arisen such that they’re entitled to the farm and should be given that entire interest, if it’d be unconscionable for the promise to be unfulfilled, or to resile on their promise.”
One particularly striking case is Davies v Davies which involved a daughter who worked on her parents’ farm for 25 years ultimately being awarded £500,000 after proving she’d been promised a share of the farm. “This case is often referred to as the Cinderella cowgirl,” says Esther. “The courts agreed she did have an estoppel and was awarded in the end a sum of £500,000.
“While I’m arguably doing myself out of job in saying this, what cases like this show is that litigation has significant costs and should be avoided. Clear communication and formal documentation will enable this and are critically important for all parties involved when succession planning.”
Although communication in theory is simple, it’s something many farmers struggle with, explains Heather Wildman, professional facilitator at Saviour Associates. “A lot of people avoid talking about succession because they’re terrified of the ‘six Ds’ – death, disability, disease, disaster, divorce and disagreements,” explains Heather. “But one way or another, the farm business will have to transition eventually because the only certainty we all have in life is that we’ll die at some point.
“Thankfully, we don’t know when, we don’t know how, and we don’t know in what order, and that’s why I really push to get more families talking about and de-risking their business.”
Heather says her approach goes beyond traditional financial planning, instead focusing on holistic family communication. “I encourage people to discuss what their individual visions and dreams are, as well as where the farm business is now and what they envisage it being in the future.
“It’s really important to be honest about what you want and this can be difficult as people are often afraid of upsetting and offending others. But it’s vital than the incoming generation is enthusiastic and excited about the future of their farm business so the sooner you start these discussions, the better.”
For the exiting generation, something Heather also champions is creating comprehensive ‘how-to’ manuals that document not just financial assets, but family history, deeds, bank account information and even passwords for different accounts. “The goal of communication – in which ever format you do it – is to create a shared vision that respects both the legacy of previous generations and the innovative potential of younger farmers.”
While communicating the aspirations of the individual parties is vital, something which is likely to impact on these being practically feasible is tax considerations – with recent budget changes adding another layer of complexity to succession planning and significantly impacting inheritance tax relief, creating potential financial challenges for farming families.
Samantha Doherty, tax specialist and partner at Thrings Solicitors, says while there are significant challenges to navigate, there are strategies to mitigate against this, including carefully structured wills and strategic lifetime gifts.
“The biggest thing that’s come out of the budget is that the threat of paying more tax has brought planning to the forefront of farmers minds, whereas pre-budget, a farm could be passed on without any tax consequences,” says Samantha. “As such it was quite easy to ignore the succession planning that’s required, as it was largely assumed by many that the business was going to be passed on somehow and there wouldn’t be any tax consequence from it.
“Now we have exactly the same problems with succession as we had previously, but just the added problem of that if it’s not dealt with in the current generation’s lifetime, there’s potentially a massive inheritance tax bill at the end of it.”
WILL STRUCTURES
To avoid this, Samantha recommends firstly looking at the structure of any existing wills. “Let’s take a fictional scenario of Mr and Mrs Farmer. Mr Farmer owns the entire farm and enterprise which operates in his name as a sole trader. He’s married to Mrs Farmer and they have two children – one who works on the farm and the other who works away. The value of the farm is approximately £10M.
“The couple have simple wills and have left everything to each other. Based on the scenario above, if they make a simple change and leave their £1M APR and BPR allowance to the next generation – or to a trust depending on whether they know who the next generation is going to be at that point – then they can have £2M inheritance tax free, which will be a saving on inheritance tax of £200,000. So it’s quite a simple thing to change but gives a significantly different outcome for the next generation.”
Another aspect to consider is gifts during lifetime, explains Samantha. “This all falls nicely with succession planning, by considering who the next generation is that’s going to be farming and how they can be incentivised to carry on and take over the business.
“By making gifts of agricultural land, you can apply for capital gains tax holder relief, so there isn’t an immediate tax on making the gift and provided you survive seven years from making the gift. It’s outside of your estate from an inheritance tax point of view,” she says. “However, something that you really have to be aware and careful of, is making the gift but reserving some form of benefits. You have to be sure that you don’t require the assets that you are gifting.”
Samantha highlights that with partnerships, it’s simpler. “For example, if the children are involved in the partnership and they get 5% profit, if you give them some of the capital, their profit share goes up with the gift and yours reduces. In this case, you haven’t reserved the benefit, but you have to be careful to ensure the gift is a full gift.”
Something else that’s likely to come into play a lot more with tax changes is the use of trusts, believes Samantha. “If you aren’t sure as to who you want to gift the asset to, or there are issues within the next generation, then gifting the assets into trust might be a good option.
“If you gift before April 2026 there are no tax consequences of gifting assets into trust, but in the same way as a traditional gift, you have to survive for seven years for it to be outside of your estate.
“The negative to gifting into trust is that it’s subject to 10 yearly charges, which would be 3% of the value over and above £1M. But that might be a figure that the farm could sustain, because once again, you can pay that over 10 years interest-free”
Beyond the technical considerations, Lee-Ann concludes by flagging the deeply human nature of farm succession. “Talking about succession difficult, but it is the best thing you can do for your family in the long term. It’s about more than transferring assets – it’s about preserving family relationships, agricultural heritage, and creating a sustainable future. Each farm tells a unique story, and successful succession requires actively working together to make sure that story carries on into the next chapter, and the chapter after that.
“The message is unequivocal: the time to start planning is now. Your farm’s future depends on the conversations you’re willing to have today.”
This article was taken from the latest issue of CPM. Read the article in full here.
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