DEFRA Lump Sum Exit Scheme & Delinking

2021-08-27T11:05:30+01:00July 15th, 2021|

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Sustainable Farming Incentive (SFI)

Subsidies & Grants

DEFRA have finally published their consultation on the long waited Lump Sum Exit Scheme which will see a lump sum offered to qualifying farmers in place of being paid an annual direct payment until 2027.  The consultation also includes the Delinking proposal

Lump Sum Exit Scheme

Having reviewed the Lump Sum Exit Scheme consultation carefully, it might not deliver what at first was anticipated.  On first reading it has taken the shape of a very specific retirement policy requiring wholesale changes to farming business structures and Landlord and Tenant relationships.

The proposed eligibility criteria and key points from DEFRA’s consultation are:

  • It is a one-off scheme for applications in 2022 only aimed at those wishing to retire from farming but may be of any age
  • Only available to claimants of BPS in 2015 or earlier – with an exemption for claimants who have inherited a farm or succeeded to an Agricultural Holdings Act (AHA) tenancy and started claiming BPS since 2015
  • The Lump Sum Payment will be a multiple of 2.35 of the average of the BPS payment in 2018, 2019 & 2020 (adjusted if claimant currently has fewer entitlement than reference period)
  • The lump sum payable to be capped at £100,000, which equates to an average payment in the reference period of £42,500
  • All BPS entitlements will be cancelled and no new entitlement offered to new entrants or young farmers in 2022
  • No stewardship agreements may be entered into by the Lump Sum Payment recipient for the remainder of the transition period or Lump Sum Payment must be repaid
  • Land must be given up i.e. sold, gifted or leased out on a minimum five-year Farm Business Tenancy (FBT), or passed to an AHA successor, but successful applicants will be allowed to stay in a farmhouse and keep up to 5% or 5ha (whichever is the smallest) of their agricultural land
  • All partners and directors of the business will be excluded from claiming BPS elsewhere
  • Claimants, whilst not able to farm in their own right could still work as a contractor or for another farming business
  • Measures to prevent abuse of the system will be developed
  • Land given up can still be used for the new occupier to claim for BPS

Whilst this is a consultation (ending 11th August 2021) the rules of how the scheme will work are expected to be published in October 2021, including tax treatment of the Lump Sum Payment.

Delinking

In 2024 DEFRA plan to delink BPS payments from land to a single starting payment based on a reference period.  The payment would then be phased out between the period 2024 to 2027.  Entitlement would be abolished and it is likely claimants would no longer be required to submit an annual BPS claim form.  The key criteria from the consultation are:

  • BPS payments to be ‘Delinked’ from land from 2024
  • The Delinked sum will be a reference amount
  • The reference amount will be based on a reference period still to be established
  • Applicants must have been farming up to the end of 2023 to be eligible
  • Delinking means that claimants of BPS will no longer need to submit an annual BPS claim form
  • In is reported that Delinking may also bring an end to the cross-compliance regime
  • Tax treatment of delinked payments still to be established

Finally, DEFRA consultation also includes a proposed New Entrants Scheme in 2022 with details expected later this year.

 

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