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Defra's consults on The Lump Sum Option and De-linking

Farmers and interested parties have until the 11th of August to contribute to DEFRA’s consultation on “The Lump Sum Option and De-linking.  "These are major proposals set out in the Agricultural Transition Period for the Basic Payment Scheme and are seen as assisting productivity by aiding structural change and intending to support new entrants into the industry." says Holly Stafford, Director at Vickers and Barrass who explains her view on the topical subject of proposed lump sum payments for farmers to exit the industry.

The first main proposals within the consultation are to offer a lump sum payment in 2022 of the consolidated payments for years 2022 to 2027 with a requirement of the claimant to retire from farming, with the land either sold or leased to others or surrendered to the landlord. "It might be possible to retain the farmhouse and the lesser of 5% or 5 hectares of their land." explains Holly.

"To be eligible there is a reference period when you must have made a valid BPS claim in 2015 and a history of claims through to 2021, with an average payment being calculated across the years 2018 to 2020.  The payment figure under consultation is a multiplier of 2.35 for the remaining BPS payments to 2027.  There will be a cap of £100,000 which equates to the average payment within the reference period of £42,500."

"It is unclear to many within the industry how this will benefit new entrants, as what might well happen is that the land will go to an existing family member or a neighbour who adjoins the property.  Landlords might be tempted to take land back in hand and try to capitalise on future schemes and let the land on short term cropping and grazing licences and retain any SFI or ELMs payments in-house.  However, it will be possible for the new occupier to purchase entitlements and claim on that land again for the remaining life of the scheme, these though will need to be sourced on the open market, if the new occupier is not a new entrant."  

"Secondly is the De-linking option to take into consideration" says Holly. "From 2024 the requirement to have land and receive the payment will be severed with a yet to be announced reference period.  I view this, like most do, as a further simplification of the previous system."

The complexities of these proposals will be different in every situation, as every farm business is different.  "Partnerships will be one area where the devil will be in the detail and having the correct documentation in order will be critical."  

"In summary all of the above will need to be considered in any succession or exit planning scenario whether farmers are owner occupiers or tenants.    Tax is always an issue and HMRC are in discussion with DEFRA over the treatment of the lump sum.  As always professional advice should be sought at an early stage and a plan put in place to try to maximise any opportunity which this particular part of the Agricultural Transition Period offers to farmers who might be undecided over whether to step back and take a well-earned rest and potentially add some extra cash to their retirement package."

"At Vickers and Barrass we are already offering clients assistance in collaboration with their respective accountants and solicitors to navigate a way through this particular part of the Agricultural Transition Period and it is never too soon to start addressing major structural change to any farm business." concludes Holly.

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Vickers & Barrass

Vickers & Barrass

Rural Chartered Surveyors offering professional land agency services in the North East.

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