Agriculture Business structures

Posted on: March 11th, 2019 by Sarah Curzon No Comments

Post-Brexit farming will change with farmers needing to adapt to a more market facing world. This means the way farmers manage their businesses may have to change too, including the basic structure of the business.

Landowners will need to bear in mind several factors when considering new arrangements, including the new payment system and the tax situation. Below are some arrangements that could be considered:

Contract farming

This set up is frequently used by landowners wanting to retain their involvement in farming but who do not wish to engage in all aspects of the business. The owner will usually be responsible for key decisions, while the contractor will carry out practical operations on their behalf.

Partnerships

Partnerships are arrangements where individuals enter into formal agreements to create a single business. The share of each partner in the business will usually be set out in the partnership agreement.

Share farming

This set up involves two farmers agreeing to work together to share the farming of some land. The farmers remain independent of one another, with the owner providing land, buildings and fixed equipment and the other farmer, the operator, providing the working machinery and the labour.

Profit of pasturage

These agreements involve a landowner allowing another party to bring livestock on to their land just to graze. The landowner is expected to maintain and manage the land and provide the relevant facilities.

Agreements must be for a fixed term, and payment is usually per hectare, and often renewed on an annual basis.

Short fixed-term and periodic tenancies

These agreements grant the occupier exclusive occupation, meaning they can exclude everyone from the property, including the owner. The landowner is not directly involved in the farm business and offers land or buildings in return for an agreed rent.

If tenancy is for a period of two years or less it will end automatically, however for a period for more than two years, notice will need to be served to terminate the tenancy.

Longer term tenancies

Longer term tenancies also grant exclusive occupation but over an extended period of time. Landowners have to be more careful about what to consider than short-term tenancies and the tenancy agreement should be detailed and seek to account for all eventualities.

This type of tenancy will tend to suit owners who are happy to hand over a higher degree of control of their land but do not want to get rid of it completely. Also, due to the length of the agreement, greater consideration needs to be given to the upkeep and use of farm assets.

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