Beleaguered farmers who heed the Prime Minister's advice to diversify could find themselves facing unexpected tax traps.

Sidelines like livery, farm shops and barn conversions may bring unwelcome tax complications, warned Peter Silk, a member of the Farming Group of the Institute of Chartered Accountants.

The group's annual survey of farm incomes showed many farmers struggling to survive on less than £200 a week.

They are being urged on all sides to look at alternatives to traditional farming activities.

Mr Silk said: "Tony Blair has made much of the need for farmers to diversify into other rural businesses. But unfortunately, his Treasury is doing little to make this attractive.

"Many an entrepreneurial farmer could end up with some exceedingly unwelcome tax side-effects from diversifying."

He warned diversification could lead to fundamental changes in the tax status and treatment of a business or specific assets.

Farmers should talk to their chartered accountants about the effects on income tax, capital gains tax, inheritance tax and VAT before making any changes, he said.