Defra is due to announce by the end of 2021 its long-awaited report following its consultation on the lump-sum exit scheme and de-linked Basic Payment Scheme (BPS). The consultation ran from 19 May – 11 August 2021 and received 654 responses.
With the average age of farmers here in the UK around 58 years and with so many changes within the sector, there will be many people watching this announcement with interest.
With a retirement scheme expected to be open in 2022 only, how much thought have you given to whether this could benefit you?
It is important to note that instead of claiming BPS for 2022, the retirement lump sum would be claimed and all future entitlements surrendered to DEFRA as a condition for the lump sum payment, (for the remainder of the agricultural transition period to the end of 2027). Farm businesses taking the lump sum will not be able to claim any further direct payments, as they are phased out in 2027.
It is also anticipated that farmers may be fully expected to retire, not to just slow down a bit or farm less land. Owner-occupied Land would have to be sold, gifted or leased out on a minimum five-year Farm Business Tenancy. Tenanted land would have to be surrendered or passed to a successor if an Agricultural Holdings Act succession tenancy. It is expected that applicants can retain up to 5 hectares of agricultural land.
DEFRA believe that offering a lump sum will help those who wish to retire or leave the industry to do so in a planned and managed way. The scheme being restricted to 2022 only, leaves a limited amount of time to aid succession planning.
The scheme is expected to be open to farmers who started claiming BPS in 2015 or before, with an exemption for people who have inherited a farm or those who have succeeded to an Agricultural Holdings Act tenancy.
The consultation proposed payments of 2.35 times the average amount of BPS received in 2018, 19 and 20 and it is expected this to be capped at £100,000. It is also expected that no stewardship agreements can be entered into by the lump sum recipient for the remainder of the transition period (to 2027).
If you farm in a partnership or Limited Company then there may be implications for the whole business of taking a lump sum payment and the directors/shareholders might be prevented from claiming any subsidy in the future.
Another issue to consider is that of entitlements which are leased in and if they are surrendered, could landlords make compensation claims for the loss of leased BPS entitlements in the future?
A new entrants’ scheme is also expected to be announced in 2022, so it is important to take advice and to consider all of the options. There will be a range of other support schemes and grants available for farmers in England who wish to remain in the sector and further information has now been released on the Sustainable Farming Incentive which is being rolled out in 2022.
If you would like to talk to our team about any of these issues, please get in touch today.