Laceys Solicitors Laceys is a leading, forward-thinking law firm with specialist experts serving both individual and business clients across a broad spectrum of practice areas.

Navigation

News

Back

Family farms and the importance of a Farming Partnership Agreement

20th June 2019 by Victoria Boynes-Butler

Categories: What's New?
Tags: , ,

If you run a farm as a family business, with more than two partners, it is really important to have a properly drawn up Farming Partnership Agreement, a legal written document which sets out the rules of the partnership to help avoid future disputes.

Why?

If you don’t have a Farming Partnership Agreement, you are bound by Partnership Act 1890, which being over 100 years old, is out-dated and may not be relevant to your partnership today.

For example, under the Act the partnership is automatically dissolved upon a partner’s death, which may bring about unforeseen tax or legal consequences. Given that many farming partnerships are often entered into so that future value can accrue to the next generation and to maximise the availability of inheritance tax reliefs, this can be a crippling error when compared with the costs of entering into a Partnership Agreement.

Also, in the absence of a Partnership Agreement, the annual accounts may be the only evidence of the partnership, which may be challenged by HMRC.

What should a Farming Partnership Agreement consider?

Whilst there is no one size fits all Partnership Agreement and a detailed review of the business should be undertaken by professional advisors, the following areas should be considered:

  • Ownership of land – farming partnerships are usually asset rich and it is important that the Partnership Agreement and the accounts make it clear whether the farm itself is an asset of the partnership.
  • Planning beyond the current position – the agreement should govern what will happen on the death or retirement of a partner and how their share will be dealt with. A key decision will be whether the partnerships assets are to be valued at their current market value or their book value.
  • Decision making – often a senior member of the family, such as a parent will have control over decisions, which can include the allocation of income and capital profits, this may be of particular importance where there are minors as partners.
  • Dispute – whilst there is often a temptation not to address this point because “blood is thicker than water”, a well-drafted partnership agreement will include provisions to ensure that, should a dispute progress, minimum time and expense is spent on the issue.

This is not an exhaustive list as in order to advise farming partnerships it is important for professional advisors to work together to understand the issues fully, both in terms of partnership law and accounting practice.

Victoria Boynes-Butler and Kate Mansfield have recently worked together to help Mr Piers Chichester in respect of his substantial family farming business for tax and succession planning.

Mr Chichester comments, “Only fools make big, long term decisions without gaining sound advice and I am so glad to have been able to share my big burden with such understanding and competent professionals as Kate and Victoria. Although I had some end objectives I could never have worked out the best way there without their help.”

If you don’t have a partnership agreement in place, or would like your current partnership agreement reviewed, please get in touch with Victoria today to see how we can help, hopefully saving you time and money in the future.

Victoria Boynes-Butler 01202 205027 or v.boynes-butler@laceyssolicitors.co.uk.

Victoria Boynes-Butler

Associate — Corporate and Commercial

Direct dial: 01202 205027

Email

  • “First Class Service. ....Sam and Victoria were an absolute pleasure to work with whilst expertly guiding us through the pitfalls of the merger.”

    Caroline Kelleway, Burns Property Management and Lettings Limited

  • “We would like to thank Victoria and the rest of the team at Laceys for helping us in a very professional, efficient and courteous manner complete the acquisition of the Cottage Lodge Hotel in Brockenhurst.”

    Maurizio Redaeilli, Cottage Lodge Hotel Limited

  • “I was pleased to work with Sam and Victoria who managed to simplify this matter for us, and explain the intricacies of the transaction at each stage and advise us accordingly. They provided great flexibility in working with us both and guiding us through this whole transaction. Many thanks.”

    Tim Townsend, Hamilton Townsend

  • “Only fools make big, long term decisions without gaining sound advice and I am so glad to have been able to share my big burden with such understanding and competent professionals as Victoria. Although I had some end objectives I could never have worked out the best way there without their help.”

    Piers Chichester

  • “Very good service, plenty of off-road parking, made our life easy and helped us sort out a difficult situation and explained it to us in layman's terms.”

    Richard Wayles, Meridian Electrical Contracting Limited

  • “An extremely efficient firm of Solicitors, who have dealt with my family legal needs as required for at least 20 years, even though I have moved to Australia after living in Dorset all my life.”

    Judith Brown

Victoria is a member of our Corporate and Commercial team having recently relocated back to Bournemouth from London. Victoria has advised businesses, charities and individuals across a range of sectors, specialising in corporate acquisitions and associated finance and commercial contracts.

Victoria adopts a pro-active, straight-forward approach in helping clients achieve their long-term business aims.

Outside of work Victoria makes the most of living on the South Coast with long walks in the New Forest and paddle boarding in Sandbanks.

Related articles

Logo for Burns Hamilton property management company

Laceys Corporate team advise on Burns Hamilton property management merger

Laceys corporate team recently advised on the merger of two of Bournemouth’s largest property management agencies, Burns...

Read Article

Family farms and the importance of a Farming Partnership Agreement

If you run a farm as a family business, with more than two partners, it is really...

Read Article

Close X