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Mon 18 December 2017
Considering stepping back from farming? Caroline Foot of Stags Professional Services department outlines five ways to let your land:
A grazing licence is a short-term agreement - usually from March/April to October/November - for grazing and/or mowing grassland. Responsibilities for fertilising and maintenance usually lie with the landowner and the grazier is simply responsible for his stock and/or cutting and taking away the crop of grass. A cropping licence is another short-term agreement. For the lifetime of a crop, the licensee is responsible for the establishment and management of the crop and vacates the land on harvesting it.
Some land is suited to horse grazing, which can usually achieve a premium rent above agricultural prices using a short-term Common Law Tenancy. Equestrian users would usually also require a suitable building onsite or closeby, and there may be implications in terms of planning as equestrian is considered separate to agriculture.
Share Farming is less of a ‘letting’ arrangement and more of a collaborative approach, which is better suited to livestock farming rather than arable. The landowner and share farmer each brings something to the table; land, equipment and experience from the landowner and predominantly labour from the share farmer. Income is then shared based on the value of the input from each party. This arrangement usually works well for a landowner looking to step back from the physical operations and a share farmer stepping onto the farming ladder.
Contract farming is another collaborative approach, which involves the landowner and contract farmer setting out their cropping plan for the land and the contract farmer carrying out the cropping operations for a fixed fee plus a share of the profit on selling the crop. This arrangement may work well for a landowner looking to be less involved with the physical farm operations but still wanting to be involved in the management of their land.
For those landowners looking to step back from all land management and simply receive a rent, a Farm Business Tenancy (FBT) is the most appropriate agreement. There is flexibility to agree terms to suit both parties with FBTs and it’s a suitable agreement for any type of farming.
Whatever the arrangement, we would always recommend that you have an appropriate written agreement in place to protect the interests of both parties.
The three most common options are private treaty, auction or tender; all of which Stags can assist with and the choice is likely to depend on the type of arrangement and the land itself.
The different letting/collaborative arrangements will have varying impacts in terms of tax and it is worthwhile consulting your land agent and/or accountant before entering into any agreement to ensure you are aware of the impacts specific to your situation.
Depending on the arrangement, it can affect who is eligible to claim the Basic Payment Scheme and who is responsible for carrying out any obligations under Agri-Environment Scheme agreements.
Agreements attached to land can impact value so your choice of agreement may be influenced by whether or not you intend to sell the land in the near future, and if you are unsure, clauses can be inserted into longer-term agreements to allow for changes in circumstances.
Stags Professional Services department is always happy to advise on what may be the best arrangement for you and your circumstances. We can also discuss the various other relevant matters in conjunction with your accountant and other advisors as may be necessary. If you are considering any of the above or would like further information, please contact our Professional Services department.