Viticulture

Our rural team work alongside a number of vineyards offering advice to those interested in developing a viticulture business, as well as established wine producers looking to expand and export into overseas markets.

Here are just some of our advisory services for the viticulture sector and how we help:

Cashflow and finance

Cashflow management is key for any business and with viticulture it can be vital to the survival of your business for not only new start-ups but also some well-established vineyards. The nature of production, the market, and the product itself can throw up a variety of obstacles from initial set-up costs, the time it takes to get to market and of course the unpredictability of the UK weather.

Although these obstacles are both foreseeable and unforeseeable there are ways in which you can financially plan for them in order to mitigate risk and as a firm Kreston Reeves is here to guide and support you through all aspects, including:-

• Setting up the right business structure
• Choosing the right funding structure
• Utilising tax reliefs that are available such as capital allowances and R&D tax credits
• Utilising cloud technology for your finance function for accurate up-to-date reporting
• Budgets and cash flow forecasts
• Debt management

Capital allowances

Capital allowances remain a legitimate form of tax relief and can generate valuable tax savings for your business. Capital allowances are the tax version of depreciation and are available on expenditure on plant and machinery and even commercial buildings and structures and are available to all businesses.

The UK viticulture industry is growing at an exponential rate, which results in businesses investing in infrastructure and machinery to be able to succeed for which capital allowances are available.

The UK Government is also encouraging businesses to invest in plant and machinery by allowing businesses to receive immediate tax relief in the form of the Annual Investment Allowance (AIA).  The AIA allows for a 100% allowance of up to £1million of expenditure on plant and machinery incurred up to 31 December 2020. The allowance is due to drop to £200,000 from 1 January 2021, so timing of the expenditure is key!

For construction or renovation projects post 29 October 2018, a structure and buildings allowance is available for expenditure on non-residential buildings or structures, with relief being received at 3% straight line per annum. Prior to this date, no tax relief was available for the buildings which were used in the business, so this is a huge help for growing businesses.

Business structure

Regardless of whether your enterprise is a new standalone venture or an offshoot of an existing business, the structure of the enterprise needs detailed consideration, not only in the context of short and longer-term tax mitigation but from commercial perspectives. Some of the key considerations are listed below:

• Will the new enterprise, or elements of it, expose the owners to additional risks which could be mitigated, or ring-fenced?
• Who will be responsible for managing and developing the new enterprise? Who should be rewarded for the profits generated, and potentially, any capital values created? Are these arrangements fixed or will significant flexibility be required?
• How will the enterprise be financed and over what period? Will significant profits be retained to repay financing and fund future development? Are external investors interested in an equity stake and is this prospect palatable?
• Is the enterprise likely to make tax losses in the initial phase of operation and what potential is there to utilise these losses, prior to generating a profit?
• Does the proposed enterprise provide opportunities to facilitate succession and incentivise the younger generation?
• Is the enterprise the right thing to take on and is the timing right? Do we have the skills, interest and time? Will the project be detrimental to the time available to manage and develop other, potentially critical, business activities?
• Would a joint venture be a practical route to secure working capital, key industry skills or access to restricted or premium markets?
• Is it possible that the enterprise will be sold and that some partitioning could make the business, or parts of it, more attractive?

Banking

The development and operation of most enterprises within the rural sector can be significantly impacted by the quality and knowledge base of a bank manager, and the sector interest and attitude of the respective bank.

Our rural teams have, and continue to, work with key individuals from all the major banks, both at local and area levels, in order to ensure that we are best placed to recommend and facilitate banking relationships.

Our relationships with a broad spectrum of lenders also enables us to help benchmark facilities and, where appropriate, facilitate new introductions with lenders offering facilities more closely aligned with the business strategy.

Longer term rate fixes can also be surprisingly attractive in the light of current interest rates and given that surplus profits during the fix period can often be used to advance infrastructure projects or land acquisitions.