So, as usual, I am late to the party when it comes to my viewing habits, but I have finally succumbed to Prime Video's eagerly anticipated second series of Clarkson's Farm. Love him or loathe him, it's an entertaining watch, and the goings on at 'Diddly Squat Farm' do bring some of the real issues and challenges faced by many of our rural and land-based clients to a wider audience.
He certainly polarises opinion, with some locals branding the venture and the attention it brings "a total menace...a danger", whilst others claim "he is making a success of it for local people, for our children and for our future."
In the aptly named first episode ('Surviving'), discussions quickly turned to the phasing out of the Basic Payment acreage based subsidy in favour of payment to farmers for delivering environmental benefits under the Environmental Land Management Schemes (ELMS) - public money for public goods. The uncertainty and lack of clarity as to what that will look like in practice, the shift in focus from food production to environment schemes and how to plug the gap in funding left by the phased withdrawal of the Basic Payment are all topics that we are regularly discussing with our rural clients.
'Plugging the income gap' and diversification projects are the focus of many a discussion with our clients, with many contemplating enterprises such as those launched by Clarkson - farm shops, leisure and tourism offerings, cafes or restaurants, holiday accommodation, event spaces, children's play areas, renewable energy production, woodland investment and carbon sequestration/credit markets.
An important consideration can be 'how can we derive more, or add more value to what we are already doing or producing'. That could be, for example, selling farm produce direct to the consumer in a farm shop or online (Cow Juice and Bee Juice!), using milk produced on farm to produce cheese, or serving farm-produced food in a new onsite eatery.
As has been highlighted quite clearly in Clarkson's Farm, such new ventures do not come without significant investment and some big risks. It's therefore critical to thoroughly budget for any new venture, and to scope out and plan to mitigate the relevant risks as far as possible. Planning permission, health and safety, and the impact on the local community and area, have obviously been huge issues for Clarkson, as highlighted in this BBC article. But there are other significant issues to consider, not least the tax implications. How will new income streams be taxed? How will those new income streams interact with existing income streams? What are the VAT implications? What about the impact on inheritance tax (IHT) reliefs?
In our recent article, we consider some of the key IHT risks of diversification in more detail:
What are the tax implications of land diversification? - Saffery Champness
"People go to the shop because it sells local. "This is what Jeremy loves: he invests in the farm, he invests in local people. "He is making a success of it for local people, for our children, and for our future."