One of the most difficult decisions faced by many farmers arises when the family diverges in some way, be it geographically after purchasing multiple farms, operationally or more commonly when the family tree has diverged.

Splitting the business often results in two very strong operations that benefit from one another’s support and close working.

The process

Valuation and mediation

The first step is to review all of the farming assets and to obtain a professional valuation. The valuation will then be discussed in detail between the owners with the aim of achieving a fair outcome for all. This part is difficult and generally requires an impartial advisor, alongside tax and legal advice, to mediate the discussion.

Sometimes the assets on both sides of a natural split are fair, for example, Farm A and Farm B, geographically split with their own farmhouse, are worth approximately the same and have roughly the same farmed areas or trading value. All sides need to come out the other side feeling like they had a good deal, or at least no worse than the other side.


Whether your business is a partnership or a limited company there are mechanisms, tax reliefs and HM Revenue & Customs (HMRC) clearances that can minimise any tax cost.

Generally the parties exchange interests in assets of equal value. For example, if two fields are owned 50% each by two individuals, they will want to achieve a situation where both fully own one field.

The process of giving up assets is a disposal for Capital Gains Tax purposes. Reliefs are available to minimise the Capital Gains Tax due where two joint owners swap ownership to achieve sole ownership of parts of the original shared farm. Where more than two joint owners are involved, the tax system is less straightforward.

Practical considerations

  • During the valuation and mediation stage, there may be specific assets that have development potential and ‘hope value’. An overage clause may be appropriate to share this potential gain. One side may ask for a right of first refusal if the “other” land is sold.
  • Crops, livestock and machinery also need to be valued and factored into the negotiations.
  • One of the farmers will need to set up a new business, needing a new bank account, new VAT registration, new payroll, new accounting system, herd records, dealing with the RPA etc. New contracts may need to be put in place for milk, etc.
  • New buildings may be needed, or an agreement to share in the short term (e.g. grain storage). Similarly, farm equipment and labour may need to be shared.
  • Do you have the necessary skills on your “side”? Training, support and mentoring may be needed.
  • The process can span a number of years depending on the complexity of the farm. It can be expensive!
  • Family relationships may become strained, before hopefully improving under the new regime.
  • Careful business plans and cash flow projections are needed. Can both businesses thrive separately?
  • What will happen to debt? Is one side prepared to take more debt with more assets to balance? Or does something need to be sold to clear debt? Security given to lenders will likely need to be adjusted.
  • What happens to any tenancies? Are reviews and changes needed?
  • The Income Tax, Capital Gains Tax and Inheritance Tax position of each new business, its owners, and the various assets need to be considered. Inheritance Tax reliefs, particularly Agricultural Property Relief and Business Property Relief need to be considered carefully, buildings and farmhouses need careful thought.

This list is far from exhaustive. Dividing any farm is unique and complex. As leading farming and rural accountants, we have a breadth of experience to draw on, to help us work with the chosen solicitor, valuer and banker to achieve the best outcome for all. We would welcome the opportunity to talk to you about your specific circumstances.

 If you have a query please contact your usual contact at Ellacotts. or 01536 646000.


Information for readers: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.