Joint ventures

Where two or more people (usually all farmers, whether owners or tenants, but could be one or more farmers and landowners) form a joint venture to undertake farming of some or all of their land between them.

The joint venture, whether a company or partnership (including a Limited Liability Partnership or LLP), then typically farms the land on a licence. The land is not an asset of the joint venture. When between farmers, this model can allow the more efficient use of machinery, livestock, labour, skills and management across the land than they would each achieve separately, and they can divide responsibilities between them.

It can also be used as a vehicle between a landowner willing to be active in farming and a new or progressing farmer to have a joint operation to the benefit of both and in which the latter can build experience and capital.

• Governed only by the law of contract, this is a flexible model that could be for some or all of the farming of the parties
• The business relationship between the parties should be discussed, agreed and recorded, with what each of them is to contribute and do, and how the rewards are to be allocated (as by shares in the partnership or company and any salaries)
• Agreement will be needed on the initial financing, how it might be brought to an end, and what is then to happen 
• Each party can have responsibility for a separate role, whether for particular operations or business functions
• The farming joint venture is then a separate business from any other activities of those involved
• As with any other business it can adapt as circumstances change, as agreed by the parties involved

• The joint venture entity is making taxable supplies for VAT purposes and therefore should be registered for VAT

Where the operation is as a company it would be taxed on its profits and losses in its own right. 

• Where the operation is a partnership, a separate partnership tax return is needed while each partner is taxed on their share of any profits
• The participants’ drawings, dividends or salaries would be taxed as appropriate
• The land of participating landowners used by the joint venture would typically qualify for APR. Where the farming is done from their dwellings they might be farmhouses for APR. The position for BPR would depend on the facts

For the participants where there are willing parties able to work together:

• Access to a larger business than each could achieve on their own
• Giving efficiencies of overhead costs and potential buying power for inputs
• Allowing each a role in that business which can recognise other inputs such as management – so the benefits of specialisation as well as cooperation 

For the landowner: 

• Remaining in legal occupation of the land
• Not needing to commit all land or farming to the ventures
• Supporting the effective farming of the land
• Access to working with new people and other skill sets which can help business development and innovation