16 May 2017
Having recently attended a Bidwell’s seminar on how tourism is becoming a significant player in farm diversification, it got me thinking – how big is the opportunity?
What is agritourism?
It has been around for some time now and one of the best examples of a success story is Glastonbury music festival. Starting from its humble beginning in 1970 with 1500 visitors, it now has around 175,000 attendees every year! If you are going, I’ll see you there next month. However, not everyone can organise a huge music festival on their farm, and the market is becoming hugely saturated with many festivals to choose from, making it hard to differentiate yours from the crowd.
Agritoursim has an array of other forms: from bed and breakfasts to providing the land for a Tough Mudder event, letting people pick their own fruit, having open farms, lambing events, glamping, weddings and corporate events.
The ups and downs
The most obvious benefit with these activities is that they can provide supplementary income for the farming business which is well needed when farm commodity prices are low. We are also moving into a period when subsidy support is somewhat unknown past 2019. Ensuring your farm is less reliant on subsidies now will mean you are better prepared for whatever the new government implements.
Another huge benefit I can see is that it more closely aligns the farming community with the general public and provides an insight for both parties; agritourism is mainly recreational but it does also have a strong element of education. A better understanding of food provenance will be important for UK farmers as Brexit continues to provide uncertainty, and these activities should help draft in support for the Back British Farming campaign.
However one particular drawback is a lack of hospitality and tourism expertise. Hopefully most of you reading have a good understanding of your farming enterprise but many will have never undertaken tourism activities like these. Working with a reputable team of professionals who can put you in touch with the right experts, draft robust contracts and assess key tax implications is crucial.
Key taxes to consider
VAT – many of the activities above are exempt supplies as often the farmer supplies the land for a period and receives rent in exchange. If the new activity is incorporated into the existing partnership or limited company, then this could restrict the input VAT claimable on indirect expenses as the business will become partially exempt for VAT purposes.
Income/Corporation Tax – like above, if it’s rents the farm is receiving then these will be treated as unearned investment income for individuals or subject to Corporation Tax in a company structure. B&Bs and glamping might be deemed furnished holiday lets and fall into their own subset of tax regulations.
Inheritance Tax – The existence of these activities on the farm may cause issues with agricultural property relief, but business property relief could also be viable in some circumstances.
In order to ensure the best possible outcome, it is advisable to seek professional advice regarding the taxes mentioned above.
To sum up
Have a look at the farm’s setting and the resources it has and ask yourself – is there an opportunity to be involved in agritourism here? Even if you’re not convinced yourself, let us know what you are thinking and we can help to sound the idea out, talk to other professionals such as land agents, solicitors and banks, and make sure you are not missing out on that supplementary income. Contact me or another of our rural and agriculture experts if you’d like to discuss agritourism and any of its aspects.
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