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Farm Accounts

I am a QBE practitioner and have recently moved to an area where there is a large farming community.

I have been asked if I have experience in doing bookkeeping and accountancy for farmers.  

The straight answer is that I don't, but I would be foolish not to get my toe in the water as there is a large potential market here.

So, the questions are -

What are the major differences between farm accounts and any other small business accounts?

Are there any pitfalls or areas of concern I would need to watch out for?

My clients have always been smaller retailers, tradesmen and service providers so this is a new direction.

Any help would be appreciated.

Thanks in advance.

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its been a long time since ive dealt with farmers so may be out of date but here is a starter for 10 off the top of my head (since no one is answering :))

Production herds held as fixed assetsAgricultrual allowances for construction expenditure (phased out by the FA2008 but may have been replaced)Knowing when a sheep is a sheep and a cow is a cow!!!! (for stock/herds)Reconciling animal numbers (i.e. opening stock, add purchases, less sales.  Extra animals? Births? missing animals? Deaths)Basic knowledge of subsidies receivedAlways showed gross profit split between animal type and crops as well - to see where the pennies arePossibility of averaging of profits - I believe this is an allowance to compensate for the possibilty of poor years/good years having a yo-yo effect on tax payments

Thats all i can think of right now (with sandwich in hand).

Like I say its been a while I've been about 7-8 years out of practice, but may be of some use.

Craig

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New equipment

Hi,

One thing you will find is that those who can afford to will buy a new tractor or build a new barn at the end of the financial year, basically the invoice received should be conveniently placed on the last day/week of the year.

Also be careful of stock valuations provided by the farmers, they can be provided at Sale value and not cost. see Help sheet 232 from HMRC.

Just a little helpful info.

Rob

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AAAARgh!!!!!

In my opinion, farmers are best left to the experts as they're just too specialised for the average practitioner.  You've got "herd basis" to deal with, and if that wasn't bad enough, then comes temporary increase/decreases of the herd.  As said above, you need to know the subsidies and grants inside out - farmers sometimes "forget" to include some income, such as wayleave, compensation, etc,  etc, so you need to get into the habit of prompting farmers for all the types of income that you'd expect from their type of farm.  Averaging is also another peculiarity.  Not to mention the IHT and CGT implications of very high value assets made harder by having land owned by older generations but farmed by their children & grandchildren, then the bungalows and houses on the farm occupied by distant relatives rent free etc!  All in all a recipe for disaster for the inexperienced.

I worked in a couple of practices that had large numbers of farming clients, but even after a few years, I still wasn't really confident with them.  In both firms, farms weren't given to trainees or junior staff - in fact, more often than not, they were given to the 1/2 experienced older accounts prep staff who'd been doing farm accounts for a decade or two.

I still vividly remember the meeting with a client that sealed my fate and resulted in me never doing another farm accounts again.  Whilst I was trying to reconcile the sheep numbers - not easy when the professional stock-taker calls a particular type of sheep by one name but the farmer uses another and the invoice says something completely different to either, not to mention the many different ways the words are pronouced, i.e.  "ewe", I asked, what I thought was a perfectly reasonable question of how many of the tups were female!  Funnily enough, the partners never gave me any more farmers after that - I wonder why?

 

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@Philip Hoyle

lol been there too my friend!!!!

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If you are serious about getting involved then

Get Julie Butler's book

Tax planning for farm and land diversification, just over 500 pages.

The basic stuff is simple enough, as long as you know your limitations...

 

You may be lucky and not be in an area where herd basis is relevant (arable etc) but there are lots of quirks on farms (no that's not a type of sheep) and that is also where the serious fees come in.

 

It is however easy to pull the wool :) over the inexperienced eye. Many years ago one of my (ex) partners noted that there was a substantial amount of chocolate powder being purchased by a farmer client and asked me why.

It was Friday, it was raining, i was bored and was in the middle of debt collecting (for a change) and told her that it was fed to the chickens to make the eggs brown. Unbelievably she went out to the clients and showed off her new found knowledge.

Monday morning more than made up for the dull Friday when i was forced to admit that my theory was nothing more than that - happy days....

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Easter

David Melia wrote:

It was Friday, it was raining, i was bored and was in the middle of debt collecting (for a change) and told her that it was fed to the chickens to make the eggs brown. Unbelievably she went out to the clients and showed off her new found knowledge.

 

 

 

Don't be daft. Everyone knows they feed chickens chocolate powder to get them laying Easter Eggs.

 

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Love working with farmers!

Over a good number of years I worked in a practice that had a fair contingent of farmers and the ones I got to work with were real diamonds. Not only did I have to deal with deciphering the various names for the various animals on the farms, but also in deciphering them in  many varied Yorkshire dialects. Once I got a handle on the working cycle of the farm, all of the various animal, crop and fertiliser descriptions and was educated into the fact that a hogg was a sheep and not an americanised name for a pig I became accepted among the local farmers.  Sadly these days a lot of the farms in this area have sold out for housing development or to large co-operatives and the ones that are left are running themselves ragged to keep their heads above water.

Yes they are challenging clients and the work is very technical - but that is reflected in the fees they pay - which, by the way, you should try to get up front wherever possible if you don't want to wait until the next harvest payment for your money.  

Most of the clients I worked with had farm secretaries to do their day to day bookkeeping, but once you get the hang of the various technical details I don't see why it should be any more daunting than any other business.

There are plenty of specialist courses relating to farming issues that would help and Tolleys produced a pretty good book on farm taxation.  I found that I learned most from my clients though.  Listen to what they have to say, be prepared to do a bit of research - the NFU is a good resource site, and if the clients know that you are interested in helping them, they will probably help you to get to grips with the nuances of their business.  It's a two way street. 

One of the biggest challenges you will probably face is the many diverse ways that farmers are having to use their land and assets to create more income.  Look out for conversion of farm buildings into holiday accomodation, bed and breakfast facilities, farm shops, storage facilities etc, just to name a few. 

I would re-iterate a point already made though, most farmers work with very high value assets  machinery, property etc - if you are not confident on a presenting issue always take further advice.  Getting it wrong can be very expensive.

Good luck.

 

 

 

 

 

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When I was a lad
..... When I was training there was a lad more senior to me who looked after all the farming clients and he claimed to be a specialist as such. As Co Durham is a rural county there were plenty of them and the fees were very good also he was also very well paid and no one ever got near his clients. He was once off sick so I got the opportunity to do a few and to be honest could not see what all the fuss was about. Expenses wise they are the same as any business. Income wise you have to watch as many payments they receive are annual grants and subsidies so you have to make sure of cut off ie 2 receipts don't go into 1 year if paid late. Herb basis etc is not rocket science and stock valuations need to be looked at as can be large but again not a huge issue. Good fees can be earned though so fill your boots. From my dealings they always seems to be decent guys and happily paid for advice. I advised one to diversify into a trout lake on a field he had that always flooded. He now makes more money from that than he did farming and has one of best fisheries in North East. They all tend to know each other as well,so signing one up can lead to others if you do a good job.

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Good post!
I'm not a big fan of the "if you're not sure then pass it to a specialist" type of advice. We are all very capable here so why not have a bash at new things. Let's not put up roadblocks!
Anyway, I'm glad you asked this cos I'm in same boat as you. Rural community, new to farming, I'll PM you and we can encourage each other!!

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