Succession Planning Presentation Wr And Bl

• A team of Rural Advisers who can work with you to develop your business

• Access to specialist advice, knowledge and information to assist your business

• The main contact point for services, grants and other support under RDPE

• Tailored on farm advice to improve resource efficiency (R4F)

To find out more:Speak to one of us at the event today!

Visit: www.businesslink.gov.uk/southwest/rural Or: www.sw-ruralgateway.info

Tel: 0845 600 9966 and ask for a member of the Rural Team

The Rural Service and RDPE

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SUPPORTING THE FARMING INDUSTRY

SUCCESSION PLANNING

www.winterrule.co.uk

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Supporting the Farming Industry

SPEAKERS:

Robert Cowie Partner specialising in advice to the agricultural community

John Endacott Specialist Tax Partner

David Bullen Corporate Finance Manager

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Almost 1/3 of farmers have no succession plan in place.

Source: Institute of Chartered Accountants Farm Business Group Survey Autumn 2009

Succession

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Reasons for Lack of Succession

Inability to attract new entrants

Insufficient provision made for retirement

- Pension

- Housing

Non-succession tenancies

Reluctance to pass down to next generation

Lack of planning to overcome

- Ownerships/structural issues

- Tax issues

Will planning not done

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Barriers to passing the business on

Do the children want it and can you work with them?

Giving away assets means giving away income derived from them

Once assets are given away they are outside your control

Need to consider the stability of children’s relationships

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Income for retiring partners

Need £20k + (net of tax) to retire on- House running- Car- Food- Telephone- Holidays

Existing pension provision House (is there a property on the farm?) Plan well ahead

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Introducing children in stages

Employee

Salaried partner

Owning partnership assets, but excluding property

Keep property off the Balance Sheet and grant an FBT

FBT provides retirement income

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Profit allocations Profit 60,000

Stage 1 – salaried (or fixed share)

Son/daughter salaried partner 12,000

Balance of profit – Mr 24,000

Mrs 24,000

48,000

60,000

Stage 2 – profit share only, not owning any assets

“Interest” – Mr 9,000

Mrs 6,000

15,000

Balance of profit – Mr 15,000

Mrs 15,000

Daughter/son 15,000

45,000

60,000

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/Continued….

Stage 3 – profit share with equal share of partnership assets

Profits – Mr 20,000Mrs 20,000

Son/daughter 20,00060,000

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Transfer of the farm business but retain ownership of the land and property

Continue as a partner in the business

Introduce son/daughter as a partner in to the business

Grant FBT to the partnership of the farmhouse, land and property

Agriculture relief for inheritance tax purposes is available due to the FBT

Gift or sell farm business assets, eg livestock, deadstock, quota, to the new partners

If sale, repay over a number of years

Herd Basis – disposal tax free

No CGT

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Use of Limited Company

Different classes of shares can be created

Retain control

26% and 51%

You can decide when you give up control

Transfer of assets to company

Use of director’s loan account

Shares can be transferred to the next generation in stages

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Inheritance Tax Considerations - Agricultural Property

Changing the nature of the asset

Agricultural property relief

Agricultural value

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Inheritance Tax Considerations - Business Property

Plant and machinery / livestock

Non-agricultural assets

Integral unit (Balfour case)

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Inheritance Tax Considerations - Planning

Transfer taxable assets first

If a gift, need to survive 7 years

Security on assets

Balfour case

OTS review

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The current CGT regime

- Designed to benefit ‘trading’ rather than ‘investment’ activities

A gift is a disposal for CGT purposes

Transfer of assets to the next generation – connected persons = gift

CGT can be avoided

- Business Assets

- Agricultural property

Holdover relief

Capital gains tax

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Agricultural/business assets only

To another individual (son/daughter)

To a trust

Gift before change of use:

- Barns for conversion

- Farm worker’s cottage

- Land for wind turbine

- Development land

Hold-over relief

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Farm land and buildings 1,000,000

Originally acquired before 1982

Value in 1982 250,000

------------

Gain 750,000

-----------CGT £75,000

======

Gain as above 750,000

Hold-over relief (750,000)

-----------Gain NIL

=======

CGT Hold-over relief - example

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Occupied by a working farmer to get IHT relief at time of death

Stay as a partner in the farm

Or if property owned outside the partnership grant an FBT of the land and house

Farmhouses

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Furnished holiday lets

ASTs

Commercial properties

Agricultural tied cottages

Cottages and Let Property

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What is asset protection?

“The taking of steps to reduce the risk of assets being dissipated by family members or accessed by claimants, in particular, a divorcing spouse or creditor”

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“Put not your trust in money,

but put your money in trust…”Sir Oliver Wendell Holmes Sr.

(physician, professor and author)

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Continuing advantages of trusts

Prevents fragmentation of ownership

Control remains in the appropriate hands

Divorce protection

Taxation

– Income Tax

– Capital Gain Tax

– Inheritance Tax

– VAT

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Try to keep farm intact

Don’t leave assets to children jointly for them to squabble over

Pass farm assets to son/daughter who works on the farm

Pass other non-farm assets to other children

Use life insurance to try and equalise

You will not equalise the asset values!

Will planning (the accountant’s perspective)

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Plan well in advance

Make early financial provision for retirement

- Pensions/Investments

- House

Where assets have to be sold consider borrowing ability of the business – do not overburden

If in partnership keep “working” or consider withdrawing

Timing is crucial

Conclusions

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RURAL DEVELOPMENT PROGRAMME FOR ENGLAND (2007-2013)

David BullenCorporate Finance Manager, Winter Rule

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RDPE •Current situation•Moving forward•Practical tips and support available

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The April Announcement

Following months of speculation, Defra have now released details on the future of the RDPE, including its delivery and budget for 2011/12. The key message as far as budget is concerned, is that Defra are able to make a commitment to continue funding all elements (Axes) under the RDPE for the remainder of the Programme. However, as they have had to reduce budgets in some areas due to cuts in public spending, funding for the Programme will be under pressure for the rest of the Programme period to 2013 in most of the South West Region. However, Cornwall and the Isles of Scilly has retained its existing budget of £55 million so there is still scope for new projects to be supported. As all projects must be completed by the end of 2013 this brings challenges of its own so if you do have a project idea now is the time to start discussing whether the RDPE can help. If you do have an idea please contact Marilyn Pryor at Business Link on 0845 600 9966. From this summer, the programme will move towards national delivery arrangements to ensure a nationally consistent approach to delivery of RDPE. It is understandable that this may raise concerns regarding ongoing access to support available while this takes place, but Defra and the RDA are doing everything they can to minimise disruption and address any concerns that people may have. Full details of the budget, the transitional arrangements and the future of the RDPE in the South West can be found in the RDA’s March 2011 newsletter Rural Development Gateway - Reduced RDPE to continue. On another note, there will a Rural Development Pavilion at this year’s Royal Cornwall Show on 9th, 10th and 11th June (adjacent to the Member’s Pavilion); so be sure to come along to the stand for the latest update on RDPE or any information, advice and guidance on the support available to farms and food businesses in Cornwall and the Isles of Scilly

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The key points:•Commitment made to continue funding all elements (Axis) under the RDPE;•Funding will be under pressure for the rest of the Programme period to 2013 in most of the South West Region; but•Cornwall and the Isles of Scilly retained its existing budget of £55 million - still scope for new projects to be supported;•Projects must be completed by the end of 2013 - this brings challenges of its own so if you have a project idea now is the time to start discussing whether the RDPE can help;•Programme will move towards national delivery arrangements to ensure nationally consistent approach to delivery of RDPE•It is understandable that this may raise concerns regarding ongoing access to support available while this takes place, but Defra and the RDA are doing everything they can to minimise disruption and address any concerns that people may have

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What this means - RDPE Funding in Cornwall Axis 1: Improving the competitiveness of the agricultural and forestry

sector. RDPE funds available under Axis 1for;

– Adding value to agricultural products– Training and skills– On-farm advice and small capital grants

Axis 3: Improving rural quality of life and diversification of the rural economy.

RDPE funds available under Axis 3 for;– Farm Diversification– Rural Micro-enterprise– Community and Social Enterprise

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RDPE moving forwards

Transfer to Defra from 1st July 2011 Programme currently open for business More information will become available in the coming weeks Current team transferring across to Defra.

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Top tips: Experience from finance applications

1. Business Case/ Robust projections

2. Know what finance is potentially available

3. Understand financiers requirements

4. Engage with relevant support agencies

5. Ducks in a row

6. Patience/ End Game

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Projections / Robust Business Case• Distillation of strategy/ ideas into numbers• Quantify finance ‘gap’• Clarify thoughts on appropriate finance• Tips

– Use off the shelf package– Integrate profit and loss, cash flow and balance sheet– Document assumptions– Check internal consistency – Model sensitivity/ risks

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RDPE specific• Quotes – Time consuming• Risk assessment• Match funding support• Return on investment• Timescales

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‘Ducks in a row’• Product/ IP Protection• Structure• Route to market• Finance

– Package!– Do not forget the bank…

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Support

• Business Link• Leadership and Management Advisory Service

(LMAS)• Others

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LMAS

• Employ b/w 2 and 249 employees• Looking to grow the business• Skills review identify need for assistance• Grant of up to £1,000 to offset costs of assistance• Examples

– Financial projections• Contact: Diana Lobb, Skills South East

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LOWIN HOUSETREGOLLS ROAD

TRUROCORNWALL

TR1 2NATELEPHONE: 01872 276477

EMAILS:

[email protected]

[email protected]

[email protected]

[email protected]

Succession Planning Presentation Wr And Bl

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