Key concerns for farming businesses in 2019

Uncertainty and risk go hand in hand in the farming industry. As well as the unremitting inconsistency of the British weather, disease, changing eating habits, tax demands and outside political factors are constant worries for farmers in the UK.

At Ware & Kay, our specialist agriculture lawyers are widely experienced in recognising and dealing with the many issues and risks involved in the farming sector and strive on a day-to-day basis to minimise the variety of stresses which arise for their many farming clients.

Our agricultural law specialists at Pearsons & Ward Solicitors in Malton outline four current concerns for farming businesses and offer practical advice on tackling them.

Uncertainty of Brexit

The UK’s exit from the European Union is currently pencilled in for 31 October 2019, but with the current political turmoil circling Westminster, whether this will actually take place by the deadline is anybody’s guess.

With so much uncertainty as to whether or not we will leave the EU with or without a deal, it is hard to plan properly for Brexit. One proactive step farming professionals can take however is to consider what impact Brexit will have on the contracts they have with customers, suppliers and other parties.

Key contracts – those which are high value or high risk, long term or strategically important to your business – should be reviewed to make them as Brexit-proof as possible, including considering whether Brexit will make it more difficult to perform obligations and/or services or if it may make the contract less profitable. This could be more likely if your contracts have an EU element, given the possible introduction of tariffs and tighter customs checks, as well as the potential labour shortages threatened by the ending of the free movement of people.

Farmers should also ensure that contacts are clear about each party’s rights and obligations post Brexit, including amendments to pricing to account for additional costs caused by Brexit, clarifying termination rights, outlining which party bears the risk of currency fluctuations, what law governs the contract, and what courts will have jurisdiction in event of disputes.

Climate Change

The impact of climate change could present significant challenges for UK farmers. Last year’s drought was illustrative of the uncertainty of the British weather, as is the unprecedented increase in flooding events over the past few years.

Climate change heralds possible threats such as rising temperatures leading to  crops such as autumn-sown cereals yielding less than their potential if they mature earlier and fresh challenges from new pests and diseases.

Increased flooding, meanwhile, may lead to considerable losses in crop production in low-lying agricultural areas and may contribute to compaction, waterlogging and erosion of soil.

There are also increased pressures on the agricultural sector to reduce its greenhouse gases emissions as the global move to reduce climate change gathers pace.

However, the increased interest and concern in reducing climate change is likely to yield new opportunities for the agricultural sector to play a key role, as evidenced in the proposed switch to a more environmentally conscious subsidy system following Brexit.

Those in the agriculture sectors who not already done so should therefore take stock of their current genotypes, varieties, breeds and management practices and be prepared to make anticipatory changes if required..

Changes in public opinion

There has been something of a sea-change in the eating habits of the British public in recent years, with a significant rise in veganism and vegetarianism.

Indeed, a survey last year by UK supermarket Waitrose revealed that one third of people in the UK are now trying to reduce their meat consumption or eat none at all, while one in eight people now identify as vegetarian or vegan.

Such a considerable shift should be kept in mind and all farming professionals should be looking hard at their current production agendas to see if diversification can help increase their profits in light of consumer trends.

Tax reliefs

Tax breaks such as agricultural property relief – a relief from inheritance tax granted under the Inheritance Tax Act 1984 which is available on the agricultural value of agricultural property which is transferred either as a gift in lifetime or on death – can be extremely generous to UK farmers, but can be easily lost. This is particularly so given the area has come under tough scrutiny by HM Revenue & Customs in recent years to ensure that all the qualifying criteria is met, with the right to claim reliefs only likely to become more difficult.

It is therefore important that farmers consult with their accountant, agent and solicitor on a regular basis to ensure that they are making the most of the tax relief available to them, and in particular that they seek detailed advice when making any major changes to there farming practices.

At Pearsons & Ward we can assist in organising your tax affairs to make sure the impact of inheritance tax and capital gains tax demands are minimised, as well as ensuring that you are able to take full advantage of all possible reliefs.

For more information on risk management or any other enquiries regarding agricultural law, please contact us today to see how we can assist.