Ready to start your new farming business? We can help
By Heather Bright, Partner and ARA specialist
As the Government seeks to boost the amount of fruit and vegetables and other arable crops grown in the UK, we may well see a boom of new businesses in the farming sector.
However, there are several issues facing new farmers and operators in the industry which act as barriers to entry or to investment in starting a new business.
Many farms are run as family businesses or as part of a wider commercial enterprise. This can make it challenging for new, independent farmers to enter the market.
Additionally, as we reported in our previous newswire, the cost of bare agricultural land is at an all time high, as is the cost of farming equipment and machinery.
Despite this, it is possible to start a new farming business with careful planning and strategic decision-making.
Get your business plan in place
Farming can be a high-risk, high-reward sector. Initial costs can be high, and it can be labour-intensive, but demand for certain produce is stable and ongoing.
To facilitate success and secure any necessary external funding, you’ll need to produce a comprehensive business plan which outlines how you plan to overcome some of the issues we have discussed.
This will include details of:
- Funding options such as loans, grants or private financing
- Revenue streams and projections
- Startup costs
- Routes to market
- Growth plans
Registering and structuring your business
You’ll need to choose the right structure for your business, such as operating as a sole trader or registering as a limited company.
This may need to be registered with Companies House, and you’ll need to understand how to pay tax on your income.
Depending on the status of your land, you may also need to register a change of land use.
Equipment and land
Representing one of the highest costs for new farming businesses, equipment and land are must-haves, but they are also the most common barriers to entry into the sector.
Equipment is more straightforward but can be expensive. The good news is that you can often claim this capital expenditure against your Corporation Tax bill (if you are operating as a limited company) or allowable expenses (as a sole trader) – reducing your tax liabilities in the year the expenditure was made.
When acquiring land and property, you’ll need to budget carefully as costs can often rise higher than expected, including:
- Rent or mortgage payments
- Utilities
- Repairs
- Registration with the right authorities
- Change of use registration.
Risk management and regulations
Due to potential environmental and safety considerations, farming is subjected to a number of regulations, particularly if you are producing food for public consumption.
You’ll need to plan for the cost of compliance when considering startup costs, including investment in sustainable technologies, meeting environmental requirements and implementing health and safety measures.
Staffing and payroll
Depending on the scale and type of farming you carry out, a new farming business can require substantial amounts of labour – which means you’ll need to bring on additional staff!
You’ll need to set up payroll and ensure that all staff are being paid correctly according to their contract and their statutory entitlement.
Additionally, you should consider whether you take on full-time, part-time or seasonal staff, allowing you to meet your labour needs without taking away from your cash reserves during quieter periods.
For advice on setting up a new farming business, contact our agriculture accounting team to discuss your needs.