Jane Harrison, Rural Adviser in the CLA North Region, comments on how to approach a diversification project.
Farm diversification is nothing new, and the CLA has published articles on it for 50 years. Accommodation, selling home-grown produce and livery yards were common examples then.
Members regularly contact me for diversification advice. However, there are considerations that should be investigated prior to starting out on a diversification journey.
Initially, a useful exercise is to sit down with a sheet of paper with a number of headings:
- Current and potential use of land and buildings;
- Characteristics and potential of the location;
- What will work on your farm;
- The impact on the existing farm business;
Hopefully, from the answers to these considerations it will be possible to whittle down your list of possible projects and start to explore what to do next.
Next, check the title deeds for any restrictive covenants as they can limit the use of land, buildings or access to agricultural use. It is unlikely that a project can go ahead if the restrictive covenant cannot be released.
Tenancies, either as a landlord or a tenant and involving buildings or land should be checked for termination provisions e.g. is there a break clause or does a premium have to be paid.
Tax is another area where it is important to obtain specialised advice before committing to a project. The most obvious tax consequence is the likely loss of Agricultural Property Relief from IHT against the value of the assets used for diversification.
Research is essential to identify your market, competitors and for your business plan which is necessary if you are wanting to borrow money or looking for grant support.
Next comes planning. Probably the most complex, costly, frustrating and time-consuming element of any project. Not all diversification projects require planning permission, but the majority do. Do seek advice at an early stage, time and time again, members come to me when their application has been refused. Do not start any development without checking what type of permission is necessary.
Finally, the fact that a diversified business should pay Business Rates is often overlooked. Agriculture is exempt from rates and as such not something that farming businesses have had to consider.
- Spend as much time as possible assessing your assets and skills whilst also identifying your markets and competitors;
- Never go ahead with any development without first checking what permissions are required.
- If you have applied for a grant never start any construction work prior to receiving written approval of the grant as it will void your application;
- Contact the CLA for advice from the outset.