Share Farming: The Benefits and Pitfalls
Share Farming is beginning to gain ground in the UK, as an increasingly desirable proposition offering a logical solution the frequent problem of a farmer who owns land but for whatever reason – often age – is unable or unwilling to farm it. It also offers an attractive prospect to graduates and young farmers looking to get a start in the industry but who can’t afford to buy or rent the land they need.
A properly drafted agreement is essential. Share Farming is not Contract Farming, a Partnership, a contract of employment or a Tenancy Agreement. It should be clear when drafting the Agreement that it is distinctly different from these and it should not be capable of interpretation as such. It operates under a relatively simple formula where a farmer with land and fixed equipment (the Landowner) enters into the agreement with another farmer (the Operator) who provides labour and machinery.
A well drafted agreement can offer many advantages to both parties. For the Landowner it provides the flexibility to offload some of the work to another, perhaps younger, farmer while still being actively involved in the business. This also allows the Landowner to continue to benefit from Tax Reliefs and EU/Government schemes such as Basic Payments.
From the Operator’s perspective it gives them a chance to get a foot on the ladder and set up their own farming business without the need for a lot of up front capital, while also benefiting from the knowledge and experience of the Landowner. Each party to the agreement will have a separate business with separate bank accounts.
While there are notable advantages to a Share Farming arrangement there are also some risks. Subject to the provisions of the agreement both parties accept full commercial risk for the business and there is no guarantee of profit for either party. This of course creates uncertainty as there is no guaranteed income for the Landowner or Operator. Essentially what the agreement means is that each party will thrive equally in good years but will have to proportionally bear the losses in less successful times.
Share Farming is just one business structure available to Famers, and of course it won’t suit everyone; but it does offer an opportunity to young farmers looking for a way in to the industry, and may make it easier for those who are looking to take a step back.
For further information on this topic please contact Philip Cuerden or Carina Pennant-Williams at Bowcock Cuerden LLP.
This article is not intended to be comprehensive or to provide specific legal advice. It should not be relied upon in the absence of specific advice given in relation to particular circumstances. © Bowcock Cuerden LLP 2017