Scotland’s farmers are dealing with an unprecedented range of business, legislative and financial problems that are putting many under unsustainable cash flow pressure.
Whether a dairy farm is dealing with a crippling milk price well below the cost of production, a livestock farm selling for little or no margin or a cereal farm selling at a loss, many farms are struggling for cash flow. In addition, the Basic Payment Entitlement (BPE) is now expected to be delayed, removing another line of revenue that played a key role shoring up cash flow.
Despite these problems, the bills continue to be presented, creditors can become increasingly agitated, and the Courts fill up with citations. For a farm trying to remain in business but struggling to find short term cash, the future can easily look bleak.
Campbell Dallas is urging Scotland’s farming community to become more aware of the Debt Arrangement Scheme, and the role it can play to help farms gain control of their cash flow problems and protect the business, allowing vital time in which to undertake planning.
The Debt Arrangement Scheme, which stems from the Debt Arrangement Scheme Scotland Act 2004, is backed by the Scottish Government and governed by the Accountant in Bankruptcy. It was previously available only to Scottish individuals but has now been made available to businesses and partnerships. Very few farmers are aware of the scheme, and whilst it is not a long term solution if the problems are overwhelming, it does put a short term break on cash flow pressures.
Andy Ritchie, Partner and farming specialist explains how the scheme works: “This Scheme allows a farm to repay its debts at an affordable rate while preventing creditors taking any further action, meaning the assets of the business are protected. It is particularly applicable to those farms struggling to maintain monthly contractual payments.
“The Debt Arrangement Scheme Scotland Act 2004, is not a form of insolvency, however, it is governed by the Accountant in Bankruptcy. It allows debtors to repay their debts, in full, over an extended period of time which is dependent on their disposable income. Once the scheme is approved creditors must freeze their interest and charges and cannot take any further action as long as the monthly payments are maintained.
“If circumstances change for the worse, for example, a farmer suffers ill health and is struggling to maintain payments to the scheme, a payment break of up to 6 months can be requested. If and when the farming industry improves and there is an increase in disposable income the farm can increase payments to reduce the term of the scheme and if it has a good year and the funds to pay debts off in full then the scheme can be settled early.
“If a creditor objects to the scheme a Fair and Reasonable test is applied by the Accountant in Bankruptcy who administers the scheme. This test is based on specific criteria, for example the length of the term, the method and frequency of payments, the percentage of debt that the objecting creditor holds and comments made by the money adviser putting the case forward. It is very rare for this test to be failed.
“For farmers worried about their cash flow and their future, DAS is well worth considering and it could help them protect their business so they are in a position to take advantage of any upturn in their market.”
Campbell Dallas is offering an initial free consultation on DAS for any farm business interested in finding out more information. Contact a member of our DAS team on 0141 886 6644 or speak to our Agricultural specialist, Andy Ritchie.