Farm business changes: Why separation rules matter

Jeanette Dennis, Partner in our Agriculture team, has recently contributed to an article in Farmer’s Weekly discussing structural changes to farming businesses.

You can read the full article here: Why changes to farm businesses need to heed separation rules. Jeanette’s contribution is below.

Jeanette Dennis, a Partner at law firm Ashtons Legal, also advises caution and careful planning for structural changes involving existing businesses or the creation of any “new” business.

Professional firms must check the background of any business before acting, including asking who is the ultimate beneficial owner (the UBO).

Getting the identity of the UBO is a requirement already imposed on law firms, so they have to dig into who will ultimately get the money out of a business (called the “beneficial interest”), as well as asking who is really in control and taking the business risk decisions.

Administering more than one business through the same point of contact could even be a red flag for the agencies, she suggests, if appropriate structures and charges are not in place to account for this.

There needs to be real business reasons for creating new entities, such as passing assets to the next generation, risk management for health and safety, compliance requirements, or even trading changes imposed by supermarkets or traders.

“Just changing for, say, SFI thresholds won’t work,” says Jeanette.

“This is the same already for tax: guidance from HMRC and case law for business changes and tax means, in some cases, you need clearance from HMRC as you can’t do something just to save tax – there always needs to be a real economic purpose, too.

“I suspect the same guidance may be unofficially in a lot of government departments now.

“It would make sense for farmers to get similar ‘clearance’ if possible, from, say, the RPA, before making changes and incurring costs.

“Also, it’s so easy now for all government agencies to find information from the internet and especially social media, which could give information about how businesses work,” she says.

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