Contract Farming Agreements- The Farmer’s Role
Far more flexible than standard tenancies, contract farming agreements allow each partner to bring different capital inputs to the arrangement and then share the profit surplus. At the same time, Grasslands contracts ensure that farmers remain compliant with the requirements for agricultural property relief (APR). In order to successfully claim APR, a farmer must demonstrate that are currently actively involved in the business. For example, farm buildings must be occupied by someone involved in the farming and any woodland must be supportive of the farm.
Beyond this, there is a wide scope for the farmer to choose how active they wish to be. All our farmers receive the first charge and a percentage of the profits from the farm. Some farmers are perfectly happy to leave it at that, occupying their time with a multitude of other interests.
However, Grasslands are more than willing to let the farmer take on a portion of the farm work if they are keen to stay actively involved. This could vary from the odd bit of maintenance to full time work in a self-employed role. The latter option has already been taken up by a number of Grasslands sites. Some of our farmers will do contract work for both Grasslands farms and other local farmers. We are very flexible with these arrangements and can accommodate a variety of types and amounts of work, all done at market rates.
Contract farming agreements can be attractive to new investors who have little to no farming experience. By working in partnership with Grasslands, investors can continue to receive the tax advantages of land ownership whilst receiving competitive returns on their capital.
From a practical point of view, the farmer is generally expected to provide the necessary land, buildings, fixed equipment and bank account. In return, they will receive a rent or first charge, then portion of the profits in accordance with an agreed ratio. This split ratio can of course be re-negotiated over time. The farm’s income and expenditure is paid into and out of the dedicated farmer’s bank account.