Farm diversification - what you need to know

When diversification or sale of assets works well it can provide financial security
When diversification or sale of assets works well it can provide financial security

According to government figures, 62% of farmers are managing financial challenges by diversifying, making on average an extra £10,400 a year.

Diversification projects have included green energy, property development, tourism, launching festivals and even building motorway service stations.

And some are enjoying considerable success.

When diversification or sale of assets works well it can provide financial security.

However, rushing into a new enterprise, if not carefully planned for, can have a negative long term financial impact, especially if future tax implications are not properly considered.

As such careful thought and advice from an accountant at an early stage is important.

Such advice will often determine many features of the project including the legal structure.

For farmers considering diversifying, or extending existing entrepreneurial activities, there are a number of key legal issues that must be taken into account.

The perils of development

Many diversification projects involve some form of development or sale of land or buildings.

Whether you are considering residential or commercial property development or the installation of renewables or leisure activities, take time to consider who you may be partnering with, as their motivation and understanding of the ongoing needs of the farm may not necessarily be the same as yours.

Developments vary enormously – from hundreds of houses to bespoke courtyard developments and some infrastructure projects (such as HS2) potentially lead to land previously unobtainable becoming free for development.

So an understanding of your land assets in the context of what’s going on around you is key.

Preparation and an understanding of the development process all helps to make sure you get to call the shots (as far as is possible) and not the developers.

Experienced solicitors, surveyors and accountants can all advise you on this and should be engaged at an early stage.

Planning permission is important, but it is just one step in the development process.

There are potentially multiple other factors to consider depending on the project. For example, whether developers can get power and other services to the plot.

What about waste management? And is permission required from third-party land owners to secure these amenities? Discharge of surface water is another issue too often overlooked but can be a major issue for a development project.

Identifying and finding solutions to possible issues will help you price your land accordingly and set you on a stronger footing when negotiating a sale.

Separate business

If your new business is outside of agriculture, it is probably advisable to consider whether to set up a separate business.

There are various reasons why this may be relevant including for tax purposes or as a method of ring fencing the new venture in case it is not successful.


If you are to take on new staff you need to be aware of your obligations towards them which can vary depending on their status – whether an employee, worker, or self-employed. You will also, amongst other things, have to adhere to minimum wage and workplace pension requirements.


Each sector may have its own specific regulations to which businesses must adhere.

These could range from health and safety considerations, tourism regulations or trading standards (if you are selling produce or goods).

You may need licences too, for example if you plan to start a festival on your land.

Preparation is key

When well prepared for, diversification or asset sales may transform the fortunes of a farm. For any new enterprise to be a success, preparation is key, as is a full understanding of the sector you wish to enter in to.

There are a host of professionals specialising in this area that can guide and advise you, help you on the path to success and make sure you don’t have any unexpected surprises down the line.

Taking the necessary advice at an early stage is essential.