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Farm

How to Buy a Farm

For agricultural amateurs, getting the advice of farmers and business transfer agents who understand the local market is imperative.

Buying a farm at once promises a tranquil escape from urban life and longer, more physically exhausting hours than most white-collar jobs.

And there are other challenges to be mindful of before you even think about searching for some land, such as the impact of Brexit on agricultural exports to the EU and being hostage to a variable – the weather – beyond your control.

If you’re new to the sector, it’s certainly wise to seek the counsel of experienced farmers.

If you decide that you are cut out for farming, it’s also advisable to appoint a business transfer agent with knowledge of the sector, ideally in the area you’re interested in. They could help you assess farms for sale on the open market or potentially secure one before it’s formally put up for sale.

Being flexible in a seller’s market

Your budgetary constraints might put you off even if your personal attributes don’t, depending on what kind of set up you had in mind.

Farmland is very much a seller’s market. Demand has long outstripped supply and that won’t likely change any time soon.

Agriculture

But as long as you’re willing to be flexible, you don’t have to be mega-rich to enter this sector.

“It's a low barrier to entry if you rent,” ex-chartered surveyor Jamie Williams, now owner of a farm in Hampshire, told BusinessesForSale.com. “The rental levels are high but if you're using marginal ground – ie, ground that the big farmers don't want – then there's very low value, particularly for grassland.”

Land values have at the time of writing remained static as the Covid-19 pandemic throttled the economy. However, prices soared during the 2007-2009 recession as investors saw land as a safe haven as other asset prices plunged.

Are you intent on a farm per se, whether focused on arable, livestock or fish farming? Or would you consider other agricultural businesses? At the time of writing this site features farmland with cottages at £1.5 million, but there’s also a smallholding with farmhouse for £500k and a horticultural nursery for £140k.

And if high prices have dashed your dreams of a 1,000-acre site, then it might be a blessing in disguise. The more land you buy, the harder it will be to maintain.

Farm

It all comes down to understanding exactly what you want and how to achieve it, which again should be done with the help of an experienced business transfer agent and/or other farming experts.

Location, soil and topography

You can also keep the price down by being flexible on location, with land prices varying considerably around the country.

However, depending on what you want to achieve with the land, you also need to think about finding the right soil, topography, and infrastructure, and potentially proximity to your markets or distribution points.

Working capital and planning permissions

If you can’t find the ideal site, whether for budgetary or availability reasons, then you might consider repurposing a less optimal farm. However, you must calculate whether you can raise the working capital necessary and obtain the relevant planning permissions.

Securing permission to build on agricultural land or reclassifying the use of existing structures can be difficult or impossible on some sites – although the UK government has eased planning restrictions.

Again, with so many variables to consider, it makes sense to have an agent or mentor who understands the sector to help you make the right choice.

Farm

For the same reasons, it’s possibly unwise to buy the first place you visit. Look at several sites so you have some points of comparison.

Tax obligations

You should also consider what tax obligations you will take on. Alex Robinson, head of agriculture at legal firm Wright Hassall, has pointed out that:

  • Stamp Duty Land Tax (SDLT) is payable on the value of farmland within 30 days of completion, with rates depending on how the purchase is structured and the number of buildings involved
  • Whether you pay VAT on the acquisition price depends on the outgoing owner’s tax status.
  • You must be VAT-registered upon completion if the seller taxed the property for VAT, and then charge VAT if you later sell or rent the land.

You might also consider what funding might be available from Defra, which the government says will replace EU subsidies, although many farmers are worried about a funding gap after ties with the bloc are fully severed.



Matthew Hernon

About the author

Matthew Hernon is an Account Manager at Dynamis looking after Business Transfer Agents and Franchises across BusinessesForSale.com and FranchiseSales.com.

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