The sale of county farms by Councils


Neil Cox, Senior Manager, Rural Team, Yeovil


With the announcement in November by Gloucester County Council that it plans to sell 38 of its tenanted farms and an earlier announcement by Somerset County Council that it too plans to sell off a similar number of farms from its portfolio, it seems likely that it will be harder for people to get a foot on the farming ladder going forward.


Unfortunately some farmers may well lose their position on the lower rungs of the ladder altogether.


Tenants of Council owned farms will understandably be worried about their position and potentially big changes to their circumstances. However with such changes there is of course opportunity. Tenants will almost certainly be considering the possibility of buying the farm and while times are tough for everyone at present, farming continues to be relatively well supported by the banks where land is available as security for finance. The value of the buildings on tenanted farms may well be relatively low as a proportion of the whole farm value by comparison to privately owned farms, thus potentially aiding access to finance, where banks are more nervous about lending secured on houses and buildings these days.


If raising a significant level of finance a strong, viable, clear and easily comprehensible business plan will be required. It will be essential to demonstrate forecast cash flows and show understanding and likely impact of feasible movements in input prices as well as output yields and prices. If the cash flow forecast can be supported by historic data then the proposition will be that much stronger. In preparing such a business plan it must also be recognised that those reviewing it are likely to be a bank’s central


credit decisions team who have little agricultural knowledge and experience.


When it comes to looking to buy their farm and approaching the various finance providers, tenant farmers may be in a stronger position than outsiders seeking the finance because they can demonstrate a history of running the farm and may therefore be in a position to provide a stronger or more reliable business plan for the backer to rely on, being able to demonstrate anticipated cash flows based on past performance and therefore the ability to meet finance obligations.


The family as a whole must be satisfied with the eventual outcome of any such project, recognising that there may be some succession planning issues to be addressed depending on the age and nature of the individual family and assets already held. The business structure must be considered alongside a review of the existing position to ensure that the ownership of the farm and other property is appropriate to the individual family and maximises the potential for Inheritance Tax reliefs as well as planning to optimise the Income Tax position and potentially the Capital Gains Tax position.


If you are looking to raise finance for a farm purchase or any other project, do contact us for a free no obligation meeting – we can assist with preparation and/or review of your business plan, cash flow forecasts and variance analyses to help maximise the chances of success when seeking finance. We take a pragmatic approach and have a broad range of contacts in the agricultural financing sector.


We can also assist from the outset of any such project, providing assistance with day to day accounting and tax compliance advice, planning and procedures through to assistance around further farm investment, development and on to succession and Inheritance Tax planning.


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