The complexities of farming diversification

The complexities of farming diversification_Whitings LLP_Landscape view of a freshly growing agriculture vegetable field. 20th March 2023
The ever-changing farming industry is one that provides a multitude of complexities for accountants and tax advisers, not only from the day to day aspects of the business, but also with the historical family arrangements to the issues of ownership and succession.


With the forthcoming changes to subsidies both in terms of the conditions and payment of such, many farmers have been looking to the future and deciding on what to do, whether this is to dispose of the business, retire and retain the ownership of the land, or to further diversify away from the more traditional farming activities.


With diversity comes further complexity and brings into question the matter of trade or business, active or passive income and perhaps even hobby.


The government have been very busy with the call for recent reports, one being the Rock Review, which considered the aspects upon the tenancy aspects of the industry, and whether there was a trade or business in existence. The difference of which is extremely relevant for both capital gains tax and inheritance tax matters and the beneficial tax reliefs that maybe available. However, from 1 April 2023, this will also become relevant for the purpose of Corporation Tax, which of course affects Limited Companies.


Another option that is now becoming more popular with the industry is that of environmental land management and the ecosystem service markets that have grown from such. Indeed Budget 2023 has now announced that it wishes to consider the tax treatment of matters associated with this developing option, and this will again look at the matter of whether there is a trade or a business, which as mentioned above is an important aspect for the claiming of beneficial tax reliefs.


The government have therefore opened a consultation on the matter, and this will be open to 9th June 2023, a link to document is here – Taxation of environmental land management and ecosystem service markets – GOV.UK (


For further comment on the matter, please do not hesitate to contact us.

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