When farm holidays can make business sense
Following an increase in demand over the past decade many of Britain’s farmers and landowners have been gearing up to provide holiday accommodation.
It has been widely reported that there is a demand for accommodation with a tangible link to the ‘real’ day-to-day workings of rural Britain, and on-farm lets are consequently becoming increasingly common. Though it is possible to be cynical about such marketing spiel, there are opportunities for those that are interested.
There are a number of reasons why such an enterprise may make sense for businesses looking to diversify. A let could create a separate enterprise for family members to take charge, as a step on the ladder toward further responsibility. Alternatively, it could help to justify the renovation or conversion of disused assets.
A number of issues should be considered if businesses are looking at diversifying in this way. This begins with the marketability of the asset. It is important to assess the options on the market in the local area and consider if your proposal will sell. Price is not the only factor. Creative farmers have gone one step further, using various objects from shepherds’ huts, through to a converted Sea King helicopter.
Another point to consider, as for any new enterprise, is the additional pressure it will place on man hours. Such enterprises can be time-consuming and consequently some choose to partner with external cleaning or marketing providers, reducing the pressure but also the return.
Holiday lettings are rated standard for the purposes of VAT. Depending on your business it would be important to consider if you wanted such an enterprise to be run within a VAT registered business (allowing some limited VAT recovery but increasing the end price) or as a separate non-VAT registered business.
If assets are to be converted or created then the possible implications on future inheritance tax should be discussed with your advisors. Likewise if it is possible that such assets may be sold.
Finally, there is the question of business and personal privacy. We are fortunate to live in a part of the country which provides more space than most get to enjoy. If paying guests are to be welcomed onto a holding then the implications in terms of practical day-to-day working, and the privacy of all, should be thought through.
Holiday accommodation is an enterprise that can work well for some, but as with all investments, it is important that professional advice be sought before decisions are made.
Jack Cooper is a land agent with Balfours, Shrewsbury
