Direct Payments: lump sum exit scheme and delinked payments – have your say!
Agriculture has hit headline news with the prospect that the UK Government are considering paying older farmers to retire. This is not new ‘news’, George Eustice initially unveiled these schemes in November 2020 when he launched ‘The Path to Sustainable Farming’.
Ultimately Eustice is recognising the age-old conundrum between generations of farming families who retain control of the business and assets vs entrants who are keen to explore farming as a career (and lifestyle) but can’t afford to enter the industry or have access to land.
26th May 2021
Becky Partridge See profile
Whilst the national press is quoting pay-outs of up to £100,000, Eustice has opened a consultation seeking views on:
- The proposed lump sum exit scheme
- DEFRA’s proposed approach to delinked payments.
The proposed lump sum exit scheme is believed to help those who wish to retire or leave the industry in a planned and managed way.
The plans to delink Direct Payments in 2024 will bring further simplification as BPS payments are phased out. When delinked payments are introduced, they will replace the current BPS in its entirety (including the young farmer payment) for all farmers for the remaining years of the agricultural transition (to 2027). It’s proposed that delinking will not be optional for farmers and recipients of BPS will not be required to continue farming after the reference period (please see below).
DEFRA would like opinions and views for:
- The eligibility criteria and aspects of how the lump sum should be calculated
- The reference period to be used to determine eligibility for, and calculate the value of, delinked payments.
Highlights of proposed eligibility for the lump sum exit scheme include:
The Lump Sum exit scheme is aimed at farmers who claim BPS and who wish to exit the industry.
A condition of the lump sum is that all English BPS entitlements held by the BPS applicant would be cancelled.
It’s an ‘all or nothing’ opportunity – i.e. a partial lump sum will not be offered.
To be eligible for the lump sum payment, the farmer (BPS applicant) would have to give up their land in England.
This means that:
- An owner-occupier must sell and/or rent out their land in England, and/or transfer it by gift
- A tenant must surrender their tenancy for land in England.
The farm business that takes the lump sum will not be able to claim any further Direct Payments. Where the business is a limited company, it is proposed that the directors will also be unable to claim future Direct Payments; similarly with a partnership, partners will be unable to claim in the future.
It’s proposed that if the lump sum recipient enters into new land management agreements, or adds land to existing agreements, during the remainder of the agricultural transition then the lump sum will need to be repaid.
Lump sum payments will be based on reference periods (TBC as part of the consultation) and could be:
- The average of 2018 to 2020 BPS scheme years
- The average of 2018 to 2022 BPS scheme years
- The 2022 BPS scheme year
- Other (to be specified)
Proposed eligibility for delinked payments:
- The delinked payments will be based on reference periods (TBC as part of the consultation). It’s proposed that it will be necessary to still be farming at the end of the reference period, and in 2023 if the reference period is earlier than this
- It’s proposed that delinked payments will not prohibit the recipient from applying for payment under new schemes such as environmental land management schemes.
There remain to be many ‘unknowns’ including the taxation of the proposed schemes together with how business structure changes may interact with eligibility, all of which DEFRA are working through to provide more detail in due course.
It will be important to consider how these schemes will impact your wider tax position, including Inheritance Tax and available reliefs, therefore decisions should not be taken lightly or without discussion with your advisers.
The consultation is a huge opportunity for the voice of the rural community to be heard and help determine the direction of these payments – so make your voice count! The closing date for responses is 11 August 2021.
For more information and to give your opinions and views please use the following links: