We are getting regular enquires from farmers looking at opportunities to expand through contract farming or share farming.  The Farm Consultancy Group recently spent one of our training days looking at the various methods available for famers to work together alongside a leading agricultural accountant.

The main methods of achieving farming together are either Share Farming or Contract Farming.  Both methods enable the land owner to protect his farming status and thus all the tax benefits that come with this, whilst enabling a third party to come in and inject capital into the business and take on the day to day running.

There are however, some subtle differences between the two options which may make one more attractive for a business over the other.

Contract farming is based around the farmer inviting a contractor to come in and manage the farm business on his behalf, be it arable, dairy, beef or sheep.  The contract is paid a basic fee for the work he provides and a share in the profit.  The farmer receives a basic charge for the land he provides plus a share in the profits.  The basic charge tends to be higher than the contract charge, but the share in the profit is normally weighted in the contractor’s favour.

Share Farming operates on a basis that all costs and income are split between the two parties.  The split is determined by the level of investment made by each party.  The investments by each party can include:
• Land and Buildings
• Stock
• Machinery
• Labour
The investment of a particular item may be 100% for one party or joint e.g. for a dairy, one party may provide the investment for the cows and the other investment for youngstock.

The key with both these options is to have very clear and open communication between both parties and have a professionally drawn up agreement.

Within the Farm Consultancy Group we have a suite of agreements provided by a firm of solicitors that will cover most scenarios and have experience in drawing up and managing these types of agreements.

If you would like to look further at this for your business, please contact Phil at pcooper@fcgagric.com or your local FCG office.