Buying A Business -- Farm Business

| 4 min read

Do you want to work for yourself and like to spend time outdoors, starting a farm business might be for you. Read on to find out how to buy a farm.

There are many types of farming business in the UK: growing crops in fields (such as grass, hay, or silage), growing crops in an orchard or under glass (e.g. rhubarb or mushrooms), or where the "crop" is an animal (e.g. lamb farming) or a product derived from animals (e.g. milk). Keeping animals (e.g. grazing horses on the land) in itself is not an agricultural business, but horse breeding is. A garden centre is not an agricultural business, but plant growing is.

We will provide a step by step guide to starting a farm business in the UK to ask the critical question you will need to know.

Click here to download a business sale agreement.

Training and gaining personal experience

For you to be managing your farm, you will need:

  • Practical experience – It is always wise to gain practical experience in the industry you want to target. It will help you acquire knowledge of the intricacies of the business and allow you to understand which type of farming business you want to get into.
  • Formal qualifications – While they are not mandatory, it will be quite useful to have acquired structured training.
  • Personal Fitness – working on a farm requires you to be strong and healthy to manage the physically demanding tasks that agriculture business requires.

Which laws do you need to comply with?

Depending on which type of farming business you want to run, there will be laws and regulations you will need to know about.

Generally, you should know about the health and safety regulations as well as laws relating to how animals and produce you farm is grown and supplied.

  • Planning permission – you will have to get planning permission from your local authority if you want to change how you use the farm or land, or to build a house.
  • Farm vehicles – Farm vehicles will have to be registered with the Driver and Vehicle Licensing Agency.
  • Registration - Agricultural land being used for agricultural purposes ought to be registered with the Rural Land Register.
  • Producing milk – If you are producing milk on your farm, you will need to register with the Food Standards Agency (FSA)
  • Health & safety – you will need to get yourself aware of and follow the guidance on health and safety on farms from the Health and Safety Executive.

Types of farm businesses

It is quite easy to be overwhelmed when you see the various types of farm business and possibilities. We will break down the significant types of farming businesses to help you decide which is best for you

You will have to get yourself acquainted with the following:

  • Utilised agricultural area (UAA) – when land is used for agricultural purposes. It also includes arable land, permanent grassland and crops, as well as kitchen gardens.
  • Arable lands – when land can be used to plough, cultivate or farmed on.
  • Pastoral land – when land is used for raising of animals.
  • Mixed farming – when land is used for both arable and pastoral farming.

Location, soil and topography

Depending on which farm business you want to run, you will have to decide on your dream farm's location, soil, and topography.

Proximity to the local markets and distribution points is also vital when selecting the location.

Assess cost

At this point, you should be aware of the major types of farming business in the UK. Now you need to start thinking about the costs involved in not only buying your dream farm but also the cost related to maintaining one.

  • Building and outbuildings – some farmlands have buildings already. If the land you want to purchase does not have the structure required to match your farming requirements, you will have to factor in the cost of extending or adding outbuildings or other structures.
  • Equipment – depending on which type of farm you intend on purchasing, you will need to obtain the relevant equipment. A cheaper option can be to rent the items or get them second hand.
  • Land – one of the major costs you will incur is the cost of the farmland. You will have to consider how much land you will need depending on which type of farm you want to run.
  • Insurance – taking out adequate business insurance is the key to protecting your farm business. Further, if you will be employing staff, you will need employers' liability insurance as well. Moreover, you will need to get insurance your equipment using contents insurance and building insurance for the property.

Tax obligations

You also need to consider the tax obligations you will take on:

  • Stamp duty land tax is payable on the value of farmland within 30 days of completion. The rate depends on the value of the land and the number of buildings involved.
  • VAT – this will depend on the outgoing owner's tax status.
  • You will have to register for VAT if the seller taxed the property for VAT and then charge VAT if you later sell or rent the land.

Due diligence

The process of due diligence is one that provides a thorough investigation into a proposed investment transaction. It means you check the investment worthiness, and assess the full claims made by the owner. This check is usually performed by a solicitor and accountant who act on behalf of the buyer. A large portion of due diligence will involve checking financial statements and accounts.

Click here to find more about due diligence.

If you buy wisely and do thorough research of the background and potential of the business which attracts your interest, you will get immediate access to the existing base of customers and suppliers. This will ensure that you know what you are getting into.

You need a solid contract

You, as the buyer, will have to produce the sale document. This agreement will have to cover the mechanics of the deal – what is being sold, where it is, how it is to be transferred, and so on. This is where warranties come in. Click here to download a business sale agreement if you are purchasing a Farm.

Warranties are legally binding promise as facts about the business, which provide information relating to the business. Click here to know about how warranties work and why they are important.

Other documents you need

The starting point for documents are those relating to the sale and purchase – of company shares, or of business assets.

Additionally, you may need assignment and novation agreements to transfer contracts the seller is a party to.

If company shares are being sold, then you will need directors service agreements, board minutes to document approvals to changes, and possibly, a new shareholders agreement and new articles of association.

We can help you find exactly what you need for your circumstances if you contact us and ask.

Please note that the information provided on this page:

  • Does not provide a complete or authoritative statement of the law;
  • Does not constitute legal advice by Net Lawman;
  • Does not create a contractual relationship;
  • Does not form part of any other advice, whether paid or free.
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