1. Farm Business Expansion in Challenging Economic TimesSimpkins Edwards Mary Jane CampbellLloyds TSB Agriculture David Fowler Luscombe Maye Stuart Hext, AmandaBurden, Claire Hoyte

2. Making way for the next generation Mary Jane Campbell 3. Including the Young FarmerThree scenarios- Within the existing business- Expansion/ improvement of operations- Starting a new enterprise 4. Existing BusinessThe existing business- Typically start as an employee- Comes a time to join parents businessAdvantages- Saves employment taxes- YF more motivated- Reduces tax burden 5. Existing BusinessDisadvantages- Responsibilities on YF- Same income to spread further- Loss of capital if YF leaves partnership 6. Existing BusinessRates and Allowances Personal Allowance8105 (under 65) 10500 (65-74) 10660 (75 plus) NI Class 4 threshold 7605 ( up to 65) Married Couples Allowance for over 75s Age Allowance for over 65s 25,400 7. Existing Business Considerations for new partners- Off farm income- Tenancy succession-Have a partnership agreement 8. Existing BusinessPartnership agreementsets out basic parametersprofit and capital sharesholidays and working timeactions if a partner wants to leave, incapacitated or diesagreement for use of land owned by a partner 9. Existing BusinessOther tax considerationsIHT - Agricultural Property ReliefCGT Entrepreneurs reliefAdditional housing requirements- local housing- sharing farmhouse- planning for agric tied dwelling 10. ExpansionExpansion Areas of expertise Which activities show best return? Assess limiting factors Improving efficiency 11. Expansion Pop up economics Tim Harford 12. ExpansionThink out side the box nominate a MattParkerIf you do what you have always done dontbe surprised when you get the result youalways get!Use benchmarking dataHave a plan with actions and targetsCheck progress against plan in words andnumbers 13. Expansion More profit Outputs - Yield/quality/price Costs price/quantity Calving interval, drilling date, cell count,LWG by feed or days System more drastic 14. ExpansionExtra resources- Land via FBT or purchase- Marginal cost means attractive rent may be tendered, or inflated price offered- Financing again marginal cost important- Cashflow criticalBut - ensure there are plans to monitor performance so it does not slip with growth 15. New Enterprise Business planning, financing etc. Trading structure - Sole trader or partnership - LLP or company Tax structure to suit - investors - workers/managers 16. New EnterpriseExample Renewables project - whose money will fund the project? - what is income profile for investors and managers?- what is impact on existing business? 17. New EnterpriseTypical succession issues- Control / insecurity- Other family members- Housing of families- Tax (rental/investment asset) 18. New enterpriseFinal thoughts To retire or not Liability to care home fees may help APR on farmhouse need the income?If you only do one thingMake a will! 19. New EnterpriseWills- clarify position for family- estate simpler and cheaper to administer- review every 10 years or so- discuss with familyGood Luck 20. Mary Jane Campbell Partner, Simpkins Edwards LLP01392 211233mjcampbell@simpkinsedwards.co.uk www.simpkinsedwards.co.uk 21. Farm Business Expansion inChallenging Economic Times David Fowler Regional Agricultural ManagerDevon01392 42487107802 655897 22. Certainties in life 23. Banking Issues World Economy Eurozone Crisis Effect on UK Banking System Borrowing consequences for farmers 24. Debt crisis the underlying problems Greece heading for default? Italy highest total debt in eurozone, corrupt, not tacklingthe issues Spain property boom/bust, 26% unemployment - 6m France huge sovereign/private exposure to Greek debt Germany most of their neighbours are broke Ireland UK has heavy exposure to Irish debt - 9Bn 25. Debt crisis the effectsThe Financial Markets Stability of banks capital ratios increased Write offs & Credit Default Insurance costs Quality of lending book? good debts/bad debts Availability of capital QE, ECB funding Mis-selling PPI & Derivatives / SWOPSThe Customers NO change servicing ability, track record, full proposalsbudgets / cash flows, gearing, securityBorrowing Terms Higher margins, due diligence, FSA Regulation 26. Bank Funding Costs lead to higher margins9.008.00UK Bank CDS spread UK banks 5-yr term funding cost (%)7.003mth Libor spreadUK Bank Rate6.005.004.003.002.001.000.00 2005 2006 2007 2008 2009 2010 2011 Source: Bloomberg/LBCM 27. UK Base Rate 300 yr lowUK Base Rate since Jan 1975 18 16 14 12Base Rate35yr Ave 10 30yr Ave25yr Ave35 Yr Ave = 8.05% 20yr Ave 815yr Ave10yr Ave 30 Yr Ave = 7.25%5yr Ave 625 Yr Ave =6.46% 4 20 Yr Ave = 5.11%15 Yr Ave = 4.43% 10Yr Ave = 3.47% 2 5 Yr Ave = 2.82% 0 5 79 13 57 91 35 79 13 57 9177 78 88 88 99 999000 00 1 n- n-n- n-n- n-n- n-n- n-n- n- n- n- n- n-n- n-n-JaJa JaJa JaJa JaJa JaJa JaJa JaJa JaJa JaJa Ja 28. Drivers affecting farming - 1. GBP/EUR 1.3GBP/EUR1.281.261.241.22 1.21.181.161.141.12 1.1 Jan-12Apr-12 Jul-12 Oct-12 Jan-13Source: Bloomberg, Lloyds Bank 29. Driver 2 - UK CP Inflation 6 %UK CPI YOY 5 4 3 2 1 0Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12Source: Bloomberg, Lloyds Bank 30. Driver 3 - Crude Oil120Crude Oil ($)110100 90 80 70 60Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12Jan-13Source: Bloomberg, Lloyds Bank 31. Driver 4 Wheat 300 Generic European Union Wheat Futures (EUR/metric tonne) 250 200 150 100 Jan-11Apr-11 Jul-11 Oct-11 Jan-12 Apr-12Jul-12 Oct-12Source: Bloomberg, Lloyds Bank 32. What does a good proposition look like?3 years up to date accounts Management information for the current year Budgets and cash flows stress tested Business Plan Planning permission Tenders / quotes Capital budgets Consultancy advice 33. What funding products are available? Overdraft Loan variable rate over base Loan fixed rate over the cost of funds Commercial Finance HP & Leasing Invoice discounting and factoring How do we assess the margin? Secured and unsecured Matrix rates based on customer risk profile how can thisbe improved? 34. Discounted loans currently available1. Funding for Lending 1% discount for the whole term Variable & fixed rate loans2. National Loan Guarantee Scheme (now finished) 1% discount for 1st 5 years of fixed loan over 250k Limited funds - 30m taken up in 1st 5 weeks 2013! 35. How we help farm businessesModern and efficient bankingfacilities delivered with a focus ongreat customer serviceFlexible options including fixed,variable, interest-only loansSingle Farm Payment (SFP) hedging Machinery and equipment financeInterest risk managementInvestment in infrastructureBusiness income protection 36. What does a good agricultural bank do? Understand the Industry Understand the market place Understand the enterprise The farmer The farm business Help Facilitate Change Help Manage Risk Deliver this knowledge locally 37. The best thing about owning a farm ......is the tax breaks..the most important of which is ..Inheritance TaxMoney Week 22.1.2010 38. DisclaimerThis presentation does not constitute or imply an offer or commitment whatsoever on the part of Lloyds TSB Bank plc (Lloyds TSB). Any such offer may only be made after the negotiation of satisfactory documentation and only after appropriate credit authority has been obtained. The pricingdiscussed herein is based on our view of current market conditions and is for discussion purposes only.This presentation and all ancillary documents relating to it (together the "Presentation") was prepared by Lloyds TSB exclusively for you for the purpose of analysing certain potential transactions. The Presentation is being made available on a strictly confidential basis to you and is intended only for theinternal use of authorised recipients (Recipients) and no part of it may be disclosed to any third party. This Presentation and the information contained herein are the property of Lloyds TSB. Recipients are hereby notified that photocopying, scanning, or any other form of reproduction, or distribution- in whole or in part - to any other person at any time is strictly prohibited without the prior written consent of Lloyds TSB.The information in this Presentation reflects prevailing conditions and our judgment as of this date, all of which are subject to change or amendment without notice and the delivery of such amended information at any time does not imply that the information (whether amended or not) contained in thisPresentation is correct as of any time subsequent to its date. Whilst Lloyds TSB have exercised reasonable care in preparing this presentation and any views or information expressed or presented are based on sources they believe to be accurate and reliable, neither Lloyds TSB, nor any of theirofficers, servants, agents, employees or advisors make any representation or warranty, express or implied, as to the fairness, accuracy, adequacy, completeness or correctness of such information, nor as to the achievement or reasonableness of any projections, targets, estimates, or forecasts andnothing in this Presentation should be relied upon as a promise or representation as to the future. Neither Lloyds TSB nor any of their officers, servants, agents, employees or advisors or any affiliate or any person connected with them accepts any liability whatsoever for any direct, indirect orconsequential damages or losses arising from any use of this Presentation or its contents or otherwise arising in connection therewith. Lloyds TSB undertakes no obligation to update or correct any information contained herein or otherwise to advise as to any future changes to it. Applicabletax, accounting and legal considerations are subject to change and in all cases independent professional advice should be sought in those areas.This Presentation is provided for information purposes only: there has been no independent verification of the contents of this Presentation. It does not constitute or contain investment advice. It is not and shall not be construed as an offer, invitation, recommendation or solicitation tosell, issue, purchase or subscribe for any securities in any jurisdiction or to enter into any transaction. It is not and shall not be construed as an offer to arrange, underwrite, finance, purchase or sell any security, financial instrument, assets, business, or otherwise provide monies to any party. Suchoffers may only be provided in writing after satisfactory legal, financial, tax, accounting and commercial due diligence, as well as approval from the relevant business and credit committees of Lloyds TSB and/or their affiliates. The information contained in this Presentation is in summary form for theconvenience of presentation and may therefore not be complete.Products and services that may be referenced in the Presentation may be provided through affiliates of Lloyds TSB or any person connected with them.Lloyds Bank Corporate Markets, Lloyds TSB Corporate Markets and Lloyds TSB are trading names of Lloyds TSB Bank plc, Lloyds TSB Scotland plc and Bank of Scotland plc. Lloyds TSB Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065.Lloyds TSB Scotland plc. Registered Office: Henry Duncan House, 120 George Street, Edinburgh EH2 4LH. Registered in Scotland no. 95237. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no. SC32700. Authorised and regulated by the Financial ServicesAuthority under registration numbers 119278, 191240 and 169628 respectively.This document is confidential, for your information only and must not be distributed, in whole or in part, to any person not involved with the proposed transaction without the prior consent of Lloyds TSB Bank plc (Lloyds TSB). Whilst Lloyds TSB has exercised reasonable care in preparing thisdocument and any views or information expressed or presented are based on sources it believes to be accurate and reliable, no representation or warranty, express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. In particular, whilst we have soughtto identify appropriate products and to provide guidance as to how those products might operate under various accounting standards we are not, and should not be considered to be, giving an accounting opinion or advice and you should conduct your own independent enquiries and seek your ownprofessional advice in this respect. Any transaction which you may enter into with us will be on the basis that you have made your own independent evaluations based on your own knowledge and experience and any professional advice which you may have sought in relation to all aspects of thetransaction including legal, regulatory, tax or accounting.All terms contained herein, including pricing, are indicative only and subject to change without notice. This material has been prepared for information purposes only and Lloyds TSB, its directors, officers and employees are not responsible for any consequences arising from any reliance upon suchinformation. If you receive information from us which is inconsistent with other information which you have received from us, you should refer this to your Lloyds TSB Sales representative for clarification.Lloyds Bank Corporate Markets, Lloyds TSB Corporate Markets and Lloyds TSB are trading names of Lloyds TSB Bank plc, Lloyds TSB Scotland plc and Bank of Scotland plc. Lloyds TSB Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065.Lloyds TSB Scotland plc. Registered Office: Henry Duncan House, 120 George Street, Edinburgh EH2 4LH. Registered in Scotland no. 95237. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no. SC32700. Authorised and regulated by the Financial ServicesAuthority under registration numbers 119278, 191240 and 169628 respectively.This presentation does not constitute or imply an offer or commitment whatsoever on the part of Lloyds TSB Bank plc (Lloyds TSB). Any such offer may only be made after the negotiation of satisfactory documentation and only after appropriate credit authority has been obtained. The pricingdiscussed herein is based on our view of current market conditions and is for discussion purposes only.This presentation and all ancillary documents relating to it (together the "Presentation") was prepared by Lloyds TSB exclusively for you for the purpose of analysing certain potential transactions. The Presentation is being made available on a strictly confidential basis to you and is intended only for theinternal use of authorised recipients (Recipients) and no part of it may be disclosed to any third party. This Presentation and the information contained herein are the property of Lloyds TSB. Recipients are hereby notified that photocopying, scanning, or any other form of reproduction, or distribution- in whole or in part - to any other person at any time is strictly prohibited without the prior written consent of Lloyds TSB.The information in this Presentation reflects prevailing conditions and our judgment as of this date, all of which are subject to change or amendment without notice and the delivery of such amended information at any time does not imply that the information (whether amended or not) contained in thisPresentation is correct as of any time subsequent to its date. Whilst Lloyds TSB have exercised reasonable care in preparing this presentation and any views or information expressed or presented are based on sources they believe to be accurate and reliable, neither Lloyds TSB, nor any of their officers,servants, agents, employees or advisors make any representation or warranty, express or implied, as to the fairness, accuracy, adequacy, completeness or correctness of such information, nor as to the achievement or reasonableness of any projections, targets, estimates, or forecasts and nothing inthis Presentation should be relied upon as a promise or representation as to the future. Neither Lloyds TSB nor any of their officers, servants, agents, employees or advisors or any affiliate or any person connected with them accepts any liability whatsoever for any direct, indirect or consequentialdamages or losses arising from any use of this Presentation or its contents or otherwise arising in connection therewith. Lloyds TSB undertakes no obligation to update or correct any information contained herein or otherwise to advise as to any future changes to it. Applicable tax, accounting and legalconsiderations are subject to change and in all cases independent professional advice should be sought in those areas.This Presentation is provided for information purposes only: there has been no independent verification of the contents of this Presentation. It does not constitute or contain investment advice. It is not and shall not be construed as an offer, invitation, recommendation or solicitation to sell, issue,purchase or subscribe for any securities in any jurisdiction or to enter into any transaction. It is not and shall not be construed as an offer to arrange, underwrite, finance, purchase or sell any security, financial instrument, assets, business, or otherwise provide monies to any party. Such offers mayonly be provided in writing after satisfactory legal, financial, tax, accounting and commercial due diligence, as well as approval from the relevant business and credit committees of Lloyds TSB and/or their affiliates. The information contained in this Presentation is in summary form for the convenience ofpresentation and may therefore not be complete.Products and services that may be referenced in the Presentation may be provided through affiliates of Lloyds TSB or any person connected with them.Lloyds TSB and their affiliates prohibits employees from offering a favourable research rating or specific price target or changing a rating or target to get a mandate and Lloyds TSB and their affiliates prohibit research analysts from being compensated for involvement in investment banking transactions,except to the extent that such participation is intended to benefit investor clients. Lloyds TSB, their affiliates, their respective directors or officers or persons connected with them may have an interest in any financial instrument mentioned in this Presentation.Lloyds Bank Corporate Markets, Lloyds TSB Corporate Markets and Lloyds TSB are trading names of Lloyds TSB Bank plc, Lloyds TSB Scotland plc and Bank of Scotland plc. Lloyds TSB Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065.Lloyds TSB Scotland plc. Registered Office: Henry Duncan House, 120 George Street, Edinburgh EH2 4LH. Registered in Scotland no. 95237. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no. SC32700 .Authorised and regulated by the Financial ServicesAuthority under registration numbers 119278, 191240 and 169628 respectively. 38 39. David Fowler Regional Agricultural Manager Thank You 40. Planning for the FutureAmanda Burden B.Sc (Hons), FAAV, MBIAC 41. Proud to be Agricultural Luscombe Maye celebrating 140th Year1873-2013 6 Offices 9 Rural Professionals Covering Devon & Cornwall Mostly specialised Professionals Planning Grants & Subsidies Valuations Landlord & Tenant Compensation Farm andLand Sales Agricultural Advice 42. Why a Planning Application ? Expansion of Farm Business Diversification of Farm Business Capitalise on Assets Need for additional dwelling Lifestyle change/Retirement Wish to get on Asset for future generations 43. National Planning Policy Framework At its heart, presumption in favour of sustainable development Economic role Social role Environmental role Para. 55 states Local planning authorities should avoid isolatedhomes in the countryside unless there are specialcircumstances such as The essential need for a rural worker to live permanently at or near their place of work in the countryside Optimal viable use of a heritage asset Re-use of redundant (farm) buildings Truly outstanding or innovative design 44. Planning Policy Statement 7(PPS 7) Annex A now defunct Permanent Dwellings Outline Application - Agree Principle and demonstrate need Reserved Matters application later Layout- Appearance Scale - Access Landscaping 45. Specific Requirements Functional Need Financial Test No other dwellings suitable andavailable close by (incl. affordable) Full time worker Suitable site (within sight & sound) 46. Conditions Agricultural Tie on new dwelling andexisting dwelling ? Limit on size of dwelling Commensurate with established needs Affordable for future use Landscaping Plus others !! 47. Associated Problems Already too many dwellings on farm ? Split holding/business Offer long-term FBT to son/daughter Not viable ? Financial Test not met Liaise with Accountant Pay some tax !! Remove Depreciation Not essential functional need ? Increase numbers for planning &breeding Creating right impression ? 48. Temporary Dwellings Demonstrate intentions to develop enterpriseeg. Farmbuildings Show business can be viable eg. BusinessPlan, Stock Numbers, Budgets Functional Need Why essential ? No Disposal of suitable dwellings or noother dwellings close by Siting and access are acceptable 49. Timing Permission for temporary dwellingsnormally 3 years Meet Financial test for permanent dwelling Extensions not normally given over 3 yearperiod Will have to be removed and occupantsmade homeless if permanent criteria notfulfilled 50. Temporary Permission PPS 7 says temporary permissions shouldnot be given on sites where LPAswould not allow a permanent dwelling More likely to support temporary dwelling Gives opportunity to make business viable Allows people to be on site Mobile home up to 60 x 20 and nomore than 2 pieces not small !!Or other temporary structure 51. Plan Ahead Seek advice from Professional/Agent not justfrom Planning Authority Seek advice from you Accountant, Solicitorand Bank Manager Capital Gains Inheritance Tax Borrowing Get a Valuation Consider your Options ? Plan well in advance 52. Remember !! Planning History on Sites - Hope Value ? Withdrawals- Approvals Refusals - Appeals Conditions Agricultural tie - Personal Permission Consents normally last 3 years Commence development subject toconditions (condition precedent) Policy Changes can renew permissions re-apply well in advance 53. The bad news is youll need a conditional use permit for the flight operations, ahealth permit for the brewing facility, and a pet permit for the menagerie.The good news is that this is a temporary use, so you wont have to go through South Hams District Council. 54. Planning for the FutureAmanda BurdenB.Sc (Hons), FAAV, MBIAC 55. Single Payment Schemeand Rural GrantsClaire Hoyte BSc (Hons) MRICS FAAV 56. Single Payment Update EU has added 9new countriessince 2005 New budget needsto incorporatethese countries Single Paymentwill still be basedon entitlements 57. Future of SPS Uncertain as limited info from Brussels atpresent EU commission carrying out review of CAP Basic proposals published in October 2011 Basic Payment Scheme Will include greening measures Must have activated one unit of entitlement inreference year currently 2011 but notfinalised. Not anticipated to start until 2015 58. What this means Entitlements still have a value for nexttwo years Flat rate value depends on Euro rate Dont change any details aboutbusiness 59. Things to note for the 2013 year 1st March SPS Claim forms released 2nd April Transfer deadline 15th May Claim deadline MAPPING Proposed 30 day rule SOIL PROTECTION REVIEW 60. And for new farmers.. New Entrants Scheme This is a possibility for Young Farmers Will be mandatory for all member states Access to National Reserve Top Up Payment 61. Grants Catchment Sensitive Farming Across UK target areas Whole of South Devon 10,000 based on 50% cost Including own labour 62. Catchment Sensitive FarmingOpen 1st March to 30th April 63. Other schemes Entry Level Stewardship 30 per ha Uplands Entry Level Stewardship 62 per ha Organic Entry Level Stewardship 60 per ha plus 175 for 2 years conversion Higher Level Stewardship funding nowceased 64. Proud to be Agricultural Luscombe Maye celebrating 140th Year1873-2013 6 Offices 9 Rural Professionals Covering Devon & Cornwall Specialised Professionals Planning Grants & Subsidies Valuations Landlord & Tenant Compensation Farm andLand Sales Agricultural Advice 65. ANY QUESTIONS? 66. Please complete a feedbackform and stay for a chat andenjoy some light refreshments.