ICAEW Farming and Rural Business Conference 2019 highlights
The best bits from this year's Farming & Rural Business Community conference.
The conference opened with NFU vice president, Guy Smith, giving us his views on how he saw the industry, and his farm, performing after Brexit. After reminding us that the key issues of weather, politics and prices would always be relevant (and a drought had once resulted in the Sun newspaper sending a rain dancer to his farm). A combination of drainage, water storage and pricing tools would be used to mitigate these risks.
He favoured diversification, but not to the extent where the diversification income might subsidise inefficiencies in the core business. In future, UK farms would need to move towards “net zero” carbon emissions, something which might be achieved by:
- Increasing productivity
- Better carbon sequestration
- Direct action, such as increasing g solar power production
His talk was followed by a long Q & A session covering, inter alia, renewables, red meat, relations with government, subsidies, international trade and access to labour post Brexit.
Vin Pandar from Lloyds bank took second slot, and immediately created an impression with the news that every 17 seconds there is a fraud attack in the UK. She explained that fraudsters will often carry out extensive research before an attack to make the approach seem credible (e.g. by mentioning genuine transactions on an account) and will often time the attacks to coincide with known cash flows such as BPS payments. Attacks might come from:
- Phishing, where emails direct the victim to a fraudulent website in order to obtain personal information or passwords
- Vishing or smishing where telephone approaches or texts are used to obtain information or persuade the victim to transfer money
- Invoice fraud where a genuine invoice is intercepted via email hacking and is passed on with altered payment details
- Ransomware, where data is encrypted by the fraudster and will only be released for a price
- Fictitious plant sales, where an item (often genuine, but not belonging to the fraudster) is advertised but disappears after the victim has paid a deposit.
To stay ahead of the fraudster, privacy settings on social email should always be kept to the highest level, telephone calls purporting to be from the bank should always be verified by ringing a known bank contact number from a different phone, and passwords should be changed regularly – a password made up from three random words will take far longer to crack than a simple word/number combination.
Michael Hesketh then took us through the detail of the May -v- CIR tax case, concerning the eligibility of a grain silo for capital allowances. Outline details of the case have already been covered in a previous issue of this newsletter, but Michael went through each step of the arguments put forward by HMRC and the taxpayer and the first-tier tribunal’s decisions on each aspect. A broader discussion then followed on how the judgement might be extended into other areas such as building conversions or potato stores.
Figured, the second of the day’s sponsors described features being added to their software package, a bespoke farming module which bolts on to Xero. The package is now used by over 23,000 farms worldwide and is being improved by the development of forecasting and budgeting functions and the addition of a specific application for farms which are primarily arable.
Our second working farmer of the day was Roger Mercer whose family farms in and around Staffordshire producing over 5,000 pigs per week along with 10,000 chickens. Roger, whose farm is now in its fourth generation, stressed how important it is to bring the next generation into farm management at an early stage – ownership of the land is a different matter and can happen later. He took us through a fascinating business structure with a formal board structure and multiple cost centres and cross changing mechanisms which allow each element of the complex business to be measured fairly and in isolation. Roger’s concerns for the future included Brexit, tariffs, quality standards, labour shortages, currency fluctuations, disease, border controls and potential changes in government.
In the afternoon we welcomed back Jeremy Moody, chief adviser to the CAAV who went at high speed through the bones of the Brexit proposals, “cutting through the noise”. He saw the UK farming industry standing on the cusp of a technical revolution with Brexit as an accelerant of change. Climate change will also be a huge driver of transition, impacting on land use, productivity and business structures – since the mid-2000s the UK industry has in many ways been sitting in limbo, supported by direct payments which have inhibited developments, so the removal of these could result in a rapid rebound. In the longer term he looked to a stronger growth in the UK industry post Brexit on the back of rapid economic growth outside Europe, changing markets and speciality production, building on the UK’s current strong reputation for food quality.
Simon Blandford from Savills (and also our third working farmer of the day) followed Jeremy with an analysis of land and commodity prices and farm productivity, profitability analysis by sector and the potential benefits from technical developments such as smart machinery, self-driving tractors, textable cows, drones, vertical farming, laboratory grown burgers and insect protein (thankfully he did not provide samples).
Finally, Rebecca Bennyworth rounded off the day with an overview of current tax issues including AIA changes, Structures and Buildings Allowance, IR35 developments, R&D tax credits, electric cars and the reinstatement of HMRC as a preferential creditor where an insolvent business or individual has creditors for taxes such as PAYE or VAT.