Farm Succession Danish Style

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William Waterfield (Andover)

The issue of succession has become a priority for many UK farms thanks to last year’s budget, and the change in taxation regime for Agricultural Property and Business Asset relief.  For Danish farms coping with high levels of taxation is a fact of life.  So, it was understandable that on a recent study tour to Denmark the subject of succession was actively discussed.  Danish families traditionally sell the farming business to the next generation with banks prepared to lend long term to the right person.  The parents whilst trying to reduce their tax liability arising from the sale will typically use the funds to write off their debt and to provide themselves with a pension.

Critical to the process is the willingness of lenders to lend to the younger generation, who have often been working in the business for more than 10 years but have a business plan that can support the level of borrowing required.  A key difference in Denmark is that farmers and lenders have been comfortable with much higher levels of debt as interest rates on long term debt are typically lower than in the UK.  This willingness to fund long term debt has resulted in an industry that is very focused on and needs to drive high levels of output combined with very high level of technical efficiency, automation and scale.  The average Danish dairy farm produced over 2 million litres with yields of circa 10,000 litres from 200 cows. 

We discussed the issue with a number of farmers who had typically taken over the business in the last few years and they all made it clear that the process had been drawn out. Agreeing terms with family members is never easy and the banks were only supportive where there was a clear business plan that was well supported by accountants and other industry professionals. In a number of cases the purchasing family member had moved banks to fund the borrowing.  It was clear that well thought out inter-generational family plans supported by the good business plans were at the heart of successful succession. 

To discuss and help facilitate practical, successful succession, contact William at w.waterfield@fcgagric.com or your local FCG Office.

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