The announcement of ‘paying farmers to retire’ has been circulating the press over recent weeks.
Although the official guidance is yet to be released we felt now would be a good time to inform you of what we know.
The Department for Environment, Food and Rural Affairs (DEFRA) has published a consultation called ‘Direct Payments to farmers: Lump sum exit scheme and delinked payments in England’.
This means there is still work to be done before it is set in stone so to speak.
As part of the seven-year agricultural transition period between 2021 and 2027, untargeted direct payments to farmers in England are being reduced to zero.
There will be alternative support that will promote environmental improvements, animal health and welfare, and the reduction of carbon emissions.
Under the new agriculture policy, it is proposed (but not yet confirmed) that:
In 2022, farmers who wish to exit the industry will be given the option of taking a lump-sum payment, capped at £100,000, in place of any further direct payments.
The lump-sum payment is intended to assist existing farmers who are hoping to expand, provide opportunities for younger farmers or help those wishing to retire and leave farming all together.
This payment will be based on English Basic Payment Scheme (BPS) entitlements, which will be subsequently cancelled. The lump sum payment will be approximately equal to the direct payments which would have been paid from 2022 to 2027, for those unaffected by the cap as above.
To be eligible, the retiring farmer would have to give up their land in England. This means owner-occupiers must sell, rent out or gift their land and tenants must surrender their tenancy.
In 2024, for all farmers, direct payments will be ‘delinked’. This means that claimants will no longer have to farm the land to receive payments.
BPS payments are based on ‘entitlements’: one hectare of eligible land is needed to claim payment for each entitlement.
Farmers must have the land at their disposal on 15 May of the scheme year.
Where land is let to a tenant, it is the tenant who has it at their disposal.
Consultation
The consultation is taking place until the end of the year to decide the eligibility criteria and certain aspects of how the value of the lump sum should be calculated as well as the reference period to be used to determine eligibility for and calculate the value of delinked payments.
The consultation acknowledges that the tax treatment of lump sums and delinked payments is an important issue for many farmers.
This matter is being discussed with HMRC.
As always, we will provide updates as and when these are released which is expected to be the back end of the year.