In addition to tax considerations, it is also important to incorporate succession planning as part of the overall diversification project.
Bolted onto a core farming business, a diversified enterprise has clear advantages particularly where the two or more elements complement each other. With most rural businesses, succession is generally a key issue to consider, and this can be more difficult where there are diversified elements.
There are many factors to consider including:
Is the next generation interested in all operations or is there preference to farming or the diversified activities?
Can the next generation work with each other across the whole business unit and indeed do they want to?
If so, is there enough room for expansion for income generation to meet future needs?
If there is a desire for separation, can the constituent parts be easily divided or are they dependent upon each other? – for example shared buildings or facilities
Fundamental to effective succession will be early planning and open and frank discussion with those involved. Complete financial fairness in terms of equality of capital values cannot always be achieved and this is often the most difficult factor to overcome but early dialogue is key to avoid disputes later on. Tax planning is of course a significant factor particularly where one element of an individual’s wealth cannot pass a generation without tax liabilities whilst other elements can. Although important, tax should never be the overriding driver behind a satisfactory outcome for the parties.