On the 19th May 2021 the Government launched a consultation looking at changed to the Basic Payment Scheme (BPS) that will support farmers in England through the Agricultural Transition Period.
This transition period started earlier this year and will continue until the end of 2027. During this period there will be a gradual phasing out of direct payments and the introduction of a new system based on a soundbite we are all getting used to, ‘public money for public good.’
This consultation period is open for twelve weeks, ending on the 11th August, and is split into two different parts.
Lump Sum Exit Scheme
The Government is proposing to offer farmers who wish to leave the industry a one-off lump sum payment, the idea is that farmers accepting this payment will surrender their BPS Entitlements and then either rent out, sell, or transfer their land, or if surrender their tenancy if they are a tenant.
The average age of a farmer in the UK is 59, so the hope is that by offering those the chance to step aside or retire will free up farmland and provide new opportunities for younger farmers or to those looking to come into the industry.
This consultation is therefore seeking views from those in agriculture on what eligibility criteria should be and how these lump sums should be calculated.
It is anticipated that this scheme will open in 2022 and it is suggested that to be eligible those wishing to participate need to have been claiming BPS since at least 2015.
Payment levels are expected to be around 2.35 times the amount received over a reference period, possibly average BPS payments for 2018-20, and will be capped at £100,000.
It is important to consider that this may have both Income Tax and Capital Gains Tax implications so recommend seeking professional advice before any steps are taken.
The Second part of the consultation is looking at delinking payments. DEFRA has already provided a schedule for the phasing out of BPS over the transition period, with 2021 being the first year to see reductions.
From 2024 the plan is to delink Direct Payments from the amount of land farmed. The thinking behind this is to make the process more streamlined, allowing farmers to focus on running their business and to encourage them to implement options from the new Environmental Land Management Scheme.
The consultation is seeking views on how these ‘delinked ’payments should be calculated.
Agriculture is devolved so this consultation applies for farming businesses in England only. We will have to wait to see if similar schemes are planned for Scotland.
At Edwin Thompson we will be keeping a close eye on these developments and will are awaiting detailed rules before being able to provide advice on this matter to our clients. We do however urge anyone who receives a BPS payment to complete the online consultation form.
Post written by Jack Frater from our Galashiels office. For more information on how our environmental team can help you, please contact:
Carlisle Office: 01228 548385 – Christopher Gray, Chris Slinger and Emma Gray
Berwick: 01289 304432 – Patrick Playfair, Ali McTavish and Andrew Hamilton
Keswick: 017687 72988 – Matthew Bell and Charlotte Clayton
Galashiels: 01896 751300 – Andrew Hamilton and Jack Frater
Kendal: 01539 769790 – Chris Slinger and Matthew Bell
Windermere: 015394 48811 – Matthew Bell