Roles and Succession Planning

back to News

Max Sealy (FCG WhiteAvon)

One of the few (if any) benefits of the current proposed changes in inheritance tax is that it has really brought to the fore amongst the farming community open discussions about business structure, ownership and ultimately succession.

Within FCG we have been working hard on this topic for several years with our clients.  We have always taken the lead in actively promoting succession planning amongst family businesses, whether that be family partnerships, limited companies, or indeed joint ventures.

Succession doesn’t just mean handing down assets to avoid inheritance tax, nor should it mean spreading out partnership profits to avoid higher rate tax, although obviously both are very pertinent and important aspects.

We have always promoted the idea that succession should be a positive thing for the business, allowing family members to define their roles within the business.  For example, if bringing a younger member of the family into the business; there should be a partnership agreement, which should define the responsibilities of the partners and should schedule the ownership of the assets amongst the various family partners, as this will often vary.

A further schedule should be added for the responsibilities and roles of the partners.  This should be no different to a job description, for example if giving over responsibility for a key enterprise within the enterprise to a younger member of the family, it should set out what their roles and responsibilities are;  who they are responsible for in terms of employed staff, what the goals of that enterprise are and what the rewards would look like in terms of the success of the enterprise.

This is also an opportunity to discuss investment within enterprises and appropriate write off periods.  With investment requirements increasing on farm to meet compliance and labour efficiency this is now a good time for refinancing debt.  For good businesses, there are some attractive offers in the current finance market, particularly where they attract funding for projects that have green credentials.  This includes a lot of farm investment projects.  With base rates being slow to move there are some reasonable deals on short and medium-term finance, and this can help spread the cost of existing debt to an affordable level.  This will allow partners to be brought into the business and invest for future productivity of the farm, as well as give certainty for all involved.

A final thought is that one of the biggest changes to inheritance tax has brought home the fact that it may well have to be paid in a lot of situations where BPR and APR easily exceed any minimum thresholds.  It is no longer reasonable to expect family members to work for little or nothing.  Higher rates of reward will no doubt be needed to incentivise them to come into the business.  This will form part of this overall succession plan, carefully worked through with your consultant, accountant, solicitor, and other professional advisors.

Contact Max at maxsealy@fcgagric.com or your local FCG office, to help facilitate a start to your business succession plan.

Categories