With agricultural subsidies being phased out and input costs on the rise, many landowners are rethinking how their land can work harder for them.
Diversifying into areas such as tourism, renewable energy or commercial lets can provide a vital new income stream — but it’s not without complexity. At Tees, we work closely with farmers and rural businesses to make change manageable. From planning permissions to tax reliefs and employment law, we help you take confident steps towards a more resilient, future-proofed business.
What is farm diversification?
Farm diversification has become a key strategy that allows landowners to generate income from sources other than traditional agricultural activity. This might include:
- converting barns into holiday accommodation
- hosting events or weddings
- creating a farm shop or café
- leasing land for solar or wind projects
- renting out space for commercial or light industrial use.
It’s a way to build financial resilience and reduce reliance on subsidies, but it requires careful planning and expert advice.
Why diversify your land?
There are several reasons landowners are turning to diversification:
- Subsidy changes: The Basic Payment Scheme (BPS) is being phased out by 2027;
- Market volatility: Fertiliser and fuel costs are increasingly unpredictable;
- Tax risk: Inheritance tax changes threaten the future of family farms.
Diversification can help to manage these risks by unlocking new, more stable income streams — provided the legal and financial implications are fully understood.
Key legal considerations for farm diversification
1. Planning permissions and title constraints
Repurposing land for non-agricultural uses typically requires planning permission. Planning early and thoroughly is essential. Landowners must consider:
- Conditions attached to permissions (e.g. only selling local produce in a farm shop);
- Restrictive covenants in title deeds that may prevent certain developments;
- Whether changes of use or structural alterations are permitted.
2. Tax implications and financial planning
Diversification can significantly affect your tax position. In a changing tax landscape, advice tailored to your plans is crucial. Key considerations include:
- Agricultural Property Relief (APR): This may no longer apply if land is no longer used for farming (e.g. converting barns into hospitality venues).
- Business Property Relief (BPR): This depends on whether the activity is classed as trading or investment.
- Low-management activities: (e.g. passive campsite income) may not qualify for BPR.
3. Employment responsibilities
New business ventures often require more staff, creating local jobs but also introducing employer responsibilities. Proper preparation helps avoid legal pitfalls. You’ll need to consider:
- recruitment and staffing
- employment contracts and rights
- health and safety obligations
- payroll and pension requirements.
Planning for long-term success
Farm diversification presents real opportunities for landowners — but it’s not without risk. To succeed, you’ll need:
- a clear commercial strategy
- legal and financial due diligence
- a realistic understanding of the regulatory environment.Â
How Tees can help
At Tees, our agriculture and commercial law experts work alongside landowners to navigate every stage of the diversification process — from land use planning to tax structuring, employment, and compliance.
Whether you’re exploring a single project or a full-scale transformation, we’ll help you make informed decisions to unlock your land’s potential and secure a stronger future for your business.
