Beware staycation bills

Farmers considering diversifying to capitalise on an anticipated growth in demand for UK holidays have been given tips by a team of specialist farm insurers.

As many farmers assess the potential of unused space, either letting commercial buildings, running a B&B, selling hand-made ice-cream or providing a rural office setting, Acres Insurance Brokers have emphasised that financial rewards of a venture need to be balanced against additional red tape.

The company has highlighted key points to consider at the research phase of diversification planning in order to avoid shortfalls further down the line.

They include factoring in obtaining planning permission and the suitability of the location, awareness of inheritance tax and business regulations and additional insurance costs.

Nigel Wellings, director at Acres, said it was essential to understand the risks any proposed insurance is covering, and – just as importantly – what it is not.

“Many businesses prior to Covid-19 were of the belief that business interruption cover would pay for losses caused by the pandemic,” he said.

“In reality, this has only turned out to be the case in the minority of cases.

“You need to make sure any cover is fully explained to you, and that you understand the constraints of it.”

He advised factoring in items such as payroll increases, liabilities, indemnity limits, business interruption and value of machinery at an early stage of planning.

Turning to inheritance tax, the company advised considering whether a proposed diversification or development might upset or over-complicate a business and lifestyle as some tenancy agreements rule out diversification because of inheritance implications for landowners.

Acres said it was also important to consider if additional staff training, food hygiene certification and risk assessments are required for a new business and to determine the planned period for the venture to return a profit.

It advises: “Have a structured plan and, as the business develops, make sure your insurance arrangements accommodate the changes.”

PLANNING: Turning barns into bucks might not be easy.