The New Lay of the Land — Rural Estate Management

Posted by Re-Leased on 17th December 2021 -

While generational change is not a new concept (hence, generational), the step changes being made within Rural Estate Management currently are significant.

The expectations from younger land owners to have access to timely data, and be more hands on with the running of businesses are fundamentally changing the way farming is managed.

Combined with this change management, the withdrawal of BPS is driving the need for businesses to diversify their offering, and technology is the key to identifying these opportunities.

Re-Leased hosted a webinar to discuss this generational change, and how the use of technology, succession planning, and the roles of land agents are forging a whole new path for the future of farming.

You can watch the full webinar HERE, with experts from Fowler Fortescue, Smith & Williamson, Belport and Figured.

A data driven world.

What was once the reserve of big business, is now available to all through cloud based services such as Re-Leased, Xero and many others.

This access to current, of the moment data is providing a significant change to the way decisions are made within Rural Estate Management. Given this time of increased pressure on rural land, and the way farms operate, land owners need to be forward thinking and savvy as to how to use this information to make proactive, instead of reactive decisions.

“In order to be able to analyse your business you need an up to date & relevant data set. Many old accounting systems operate 18 months out of step with reality. Integration of icloud based accounting software such as Xero, means data is able to be analysed there and then, which in turn makes your ability to make profit easier as you can react faster” Rebecca Kimber-Danger, Director at Fowler Fortescue.

James Higgie, Business Development Manager at Figured believes that landowners should embrace this change - “Agriculture and farming can produce some of the most data sets of any industry with what is available through machinery, and it is this integration of timely information from the banks and Xero, combined with on farm data that will be the next step change in the industry.”

While some may be spooked around technology replacing humans, Ed Harden, Head of Fundraising and Investor Communications at Belport assures “ In terms of increased amounts of automation, mostly likely there will be a very long transition period where humans are in charge of systems and AI (Artificial Intelligence) won't actually replace the amount of people required to work in the agriculture industry, but it might create a different kind of role. The idea is to do less and achieve more.“

Another significant change to the farming landscape and approach to business is the transformation to an experience-led economy, with 78% of millennials desiring an experience rather than a tangible product.

James Higgie again believes this is an opportunity ripe for the taking, “Land owners now have the ability to leverage the natural capital that they have within the farming business. It is a unique offering that others don’t have, and opens up various new income streams.”

From AirBnB and glamping, to creating nature reserves, or branching out into essential oil crops and offering cheese making courses, diversification away from the sphere of traditional farming practises is now not only clever, it is often essential.

Who, and what next?

If Rural Estate businesses aren’t motivated to consider success planning, upcoming changes to the farming landscape and taxation legislation might just force the issue.

Currently gifts given to the next generation may give rise to taxes that are mitigated by reliefs. However government policy in relation to the Agri-Environment Scheme and the mismatch of the current definition of agriculture may mean that diversification and taking land out of traditional farming may start to limit the tax reliefs that are available.

For example, if the Business Property Tax Relief trading definition of 50/50 is brought into line with the definition for Capital Gains Tax iof 80/20 - and it is possible - this may see businesses traditionally qualifying for the Business Property Tax relief not anymore, and restructuring may be necessary.

Aloysia Daros, Partner, Private Client Tax Services at Smith & Williamson says that when thinking about restructure or success planning, it is important to consider who will maintain control of the business, as well as what are the families main drivers. Is inheritance tax an issue? Is it income Tax? Concern about putting the right people in the right place? Often it is a mixture of everything.

There are several options available to consider in terms of business structure :

• Partnerships - are flexible, familiar, and allow the older generation to remain active, while keeping the younger generation part of the decision making process. It also creates the opportunity for the younger generation to lead a specific area of business, and to be rewarded for any profits in that area.
• Trusts - are efficient, amenable, and take advantage of Capital Gains & Inheritance Tax reliefs.  Trusts suit families with minor children, as trustees remain in control of assets, and are independent of beneficiaries.
• Companies - are a more relevant structure if the trustees don't want to run the business.

Family scenarios rarely mean one size fits all but there are various solutions out there in a tax regime to understand before fundamental changes are made to the farming enterprise. However, now is a good time to be thinking about it. 

The changing relationship between land agents and clients

Given blind loyalty to land agents no longer exists in the modern marketplace, and as land owners become more informed and business margins decrease, land agents need to prove their value by providing opportunities by being proactive and using data to make efficient and effective decisions.

“The traditional role of land agent was older, stuffy and very much looked at the residential, agricultural and then laterally commercial landlord relationship - whereas agents are now more engaged with business planning, engaging consultants etc, bringing to life modern ideas, in much more of a hands on manner” Rebecca Kimber-Danger, Fowler-Fortescue. 

“The best working relationship is a partnership between the consultant and the client, knowing everything about the business and the family relationship as to how it impacts decisions. It changes agents' roles from compliance and land roles to more exciting, forward thinking planning.”

Watch the webinar in full: