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Monday
Jul242017

Diversification within Farming

The word "diversification" has been employed more and more frequently in recent years whilst discussing the future of the agricultural sector, but what exactly do people mean? Rather than crop diversification rules, the industry’s focus has been on branching out from traditional farming activities to add new sources of income.

Whilst the full implications of the EU referendum result in June 2016 are yet to be revealed, there is no doubt that the coming years will be testing for many of the region's farmers. Diversification could hold the key to enjoying a thriving business for those with the assets and ambition to make it happen. On the face of it, the statistics associated with leaving the EU make for grim reading for our farmers.  In 2014, subsidies paid out from the EU under the common agricultural policy (CAP) accounted for 55% of total UK farmers’ income, according to DEFRA.  Furthermore, in 2013 some 62% of agricultural exports from the UK were sold to other EU member states. The UK Government has indicated that today's level of subsidies will be maintained until 2020, but with demands for a bigger slice of public funds from many quarters, there is little expectation that the support for farmers will be increased or indeed maintained at the current levels into the next decade. It is a sobering fact that a large number of the small to medium-sized farms in the UK rely on the subsidies under the CAP to break even, let alone make a profit.  

These stark figures are no doubt the cause of sleepless nights for some in the agriculture sector. However, the possibility of a new kind of system for farm subsidies may help encourage diversification, with payments perhaps moving away from the existing model, which is largely based on the extent of the holding. The payments made to farmers for rural development projects under the existing CAP Pillar II may hint at the type of subsidy regime the UK could adopt in the next decade.

The idea of diversification is not a new concept to a great deal of farmers who are already exploring a variety of means to increase revenues and make their business sustainable, so that subsidies are a more of a bonus rather than the difference between ending the year in the red or black. 

Farmers across East Anglia are using their property in a variety of ways in addition to growing crops or rearing livestock, with the intention of ending their reliance on subsidies and to help protect against the effects of a poor harvest or lower commodity prices. 

New Permitted Development Rights, which allow certain types of change of use and development of property without the need for a full planning application, were introduced in 2014 in respect of agricultural buildings. This can allow farmers to utilise their existing buildings for flexible use, education and residential.

In an area of outstanding beauty, such as East Anglia, farmers increasingly cater for tourists by providing B&B’s and holiday lets. A barn conversion can make a wonderful home and sell for high prices on the residential property market. The utilisation of property for lease as commercial units can be a lucrative option, as can a well-stocked farm shop.

The key to success when it comes to diversification often comes down to finding a gap in the local market and making the most of any under-used resources at the disposal of the farmer. 

Before embarking on any project it is vital that full consideration is given to the financial and legal ramifications of each stage.  Expert accountancy and tax advice should be sought and any legal issues should be explored.  For example, are there restrictions or covenants affecting the use of the property or will you be required to obtain full vacant possession from an existing occupier before commencement of a project?

Greene & Greene can assist on all property aspects and can offer advice from in-house specialist tax lawyers with particular expertise in the agriculture sector.

For more information on the services offered by Greene & Greene Solicitors please visit www.greene-greene.com and follow on Twitter @GreeneGreeneLaw.

“This article was previously published in the East Anglian Daily Times on 15/7/17.”

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