In focus: Caravan storage on agricultural land – A diversification guide

Since the pandemic, there has been a massive rise in caravan ownership in the UK as millions of people look for a “staycation”. As a result, demand for secure caravan storage has soared and this presents an attractive opportunity for farmers looking at diversification.

The numbers are appealing. The Caravan Storage Site Owners’ Association says an acre of land can, on average, provide storage for 60 caravans and average annual site fees are £370 per caravan but can be as high as £800, depending on the location and level of security.

But, what do farmers need to consider when it comes to turning agricultural land into caravan storage? Is caravan storage on a farm a good investment and what will it mean for the wider farm business? And, how do you best manage a caravan storage site on your farm?

With farm buildings and land, many people think you can just chuck anything in them and carry on. However, that is not the case as caravan storage represents a material change of use from agriculture.

That change of use means farmers need to consider a wide range of issues including planning permission, the construction of new infrastructure, tax implications, increased insurance premiums as well as health and safety considerations.

Caravan storage can be a solid investment, but farmers must think very carefully before going ahead with any plans. Creating a caravan storage site on your farm is expensive. You will need to invest in lighting, fencing, access roads and additional security and these come at a cost.

However, the first major hurdle is securing planning permission. In the majority of instances, you will have to get planning permission for caravan storage to cover the change of use.

The good news is that the National Planning Policy Framework is fairly supportive of farm diversification projects and this is usually reflected in local planning policy. So as long as you have taken on board local concerns and thought about how you can mitigate potential impacts you should be able to secure planning consent to operate a caravan storage site on your farm.

The council will almost certainly impose a number of conditions relating to the number of caravans stored, opening hours, site landscaping and even recommended security measures. It is critical that farmers abide by these conditions as the council could bring enforcement action if they believe you are breaching their conditions.

With planning permission, things like hard surfaces, lights and security fences can be troublesome and could raise objections so it’s important to seek expert advice before spending significant amounts of money putting together a proposed project.

In addition to securing planning permission for caravan storage, there are a number of key financial considerations.

Once you move away from agricultural use, a farm caravan storage business is likely to be liable for business rates. The rateable value of the property will be based on rental values for similar storage sites in the locality.

You may be able to qualify for small business rates relief but, if that is not an option, you can also look to appeal the rating assessment. Specialist advisers will be able to support you in this, but these potential additional costs must be considered before investing in caravan storage.

The change of business will also have potential implications for a range of other taxes too. Consider if this diversification project will impact your ability to claim inheritance tax reliefs in the future and will the caravan storage business need to charge VAT to its customers.

These are hugely complex areas and it is easy to make a costly mistake. Again, speak to an expert adviser to make sure all of these potential pitfalls are taken into consideration.

Another key consideration is how you will manage the caravan storage business on your farm. This will range from how you manage the customer relationships and bookings, through to appropriate insurance cover and managing the people and traffic on your land.

One of the most important things will be to have clear written agreements with your customers. These contracts will set out fair and reasonable terms and will clearly state what caravan owners can and can’t do, how much they will pay and when and will provide guidelines on how they must behave and operate while on the farm.

These contracts will make things a lot simpler if there is a dispute or if you have to take action because the terms of the contract are broken. Make sure you get contracts drafted by an expert to ensure you are protected.

You will also need to carefully check your insurance. You will need public liability insurance, but you must make sure that any insurance policy provides the cover you need. Don’t just assume your agricultural insurance policy will cover the caravan storage business too. Caravan storage facilities can be a prime target for thieves and vandals so make sure you have the security and insurance you need.

Another key consideration are the caravan owners themselves. The peak time for activity on a caravan storage site will be at the start of the holiday season and that will coincide with harvest time on the farm. With large farm machinery on the move whilst caravan owners are coming to collect their mobile homes, there is obviously an increased risk to safety.

Most families will not be aware of the dangers on a farm or how to behave and that means you will have to update your health and safety rules and work to manage any risk while also ensuring they know how to stay safe.

While a caravan storage business is relatively low input, you must also consider if you have the people available to manage bookings and other key site functions like maintenance, customer support and security checks. If you have to recruit extra staff, make sure this additional overhead is included in your charges but also that you have taken expert advice regarding employment contracts, holiday/sick pay and the minimum wage.

Farm caravan storage can be a great diversification investment, but farmers must do their research before investing and make sure it is suitable for them. You can’t just copy your neighbour and assume you can repeat their success.

There are a wide range of factors that will be unique to every farm and the same model might not work for you.

Caravan storage sites do take considerable initial expense and it is critical that you have a business plan to make sure that your investment will pay off quickly and won’t have unforeseen consequences around other issues like inheritance tax, planning and staff employment.

If you would like support to explore if a caravan storage business is right for your farm, speak to your CLA representative and they will be happy to answer any questions you have.