If you are considering diversification in your farming activities, you need to be aware that diversification will not work for every business. To find out if diversification is the right choice for you, you should be ready to discuss with your professional advisor:
Realistic answers need to be given to these questions, not just a hope. If you reach a positive conclusion, you will be in a position to prepare a business plan for your diversification. You will then be able to see if it is practical to proceed.
Other benefits of diversifying your farm include:
Before deciding to diversify, you should carry out a detailed assessment of your existing business. Your financial accounts can help you to see how moving in a new business direction would affect your turnover. You will also need to have all your tax information to hand, so you can discuss tax planning with your professional adviser.
Taxation matters on diversification are complex. The business structure needs to be considered, as to sole trade, partnership or corporate, and even a possible mixture of them all.
Capital Taxes are a vital area. In particular it is essential that through diversification that the existing benefits of Agricultural Property Relief, and Business Property Relief for Inheritance Tax purposes are preserved, or potentially enhanced.
Any transfer of ownership of property will have Capital Gains Tax or SDLT implications.
If, after considering all these matters, it then becomes apparent that diversification is not for you, you will be in a better position to think realistically about the choices you need to make in your existing farm business.
For further advice on this subject please don't hesitate to contact me.
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