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Basic Payment Changes: Delinking and Lump Sum Exit plans explained

Mon 21 June 2021

DEFRA are currently consulting on their proposals for a Lump Sum Exit Scheme and approach to delinked payments under the Agricultural Transition Plan. The consultation is open until 11th August and welcomes all views to help shape the policy. Sally Blowey of Stags Professional Services outlines the current proposals.

Lump Sum Exit

The aim of the Lump Sum Exit scheme is to offer those wishing to exit the industry the opportunity to receive a lump sum payment in place of any future direct payments to aid their retirement from farming. There is no minimum age requirement so the scheme is not just aimed at those of retirement age but at anyone wishing to exit the industry. The idea behind the scheme is that this will free up land allowing new entrants opportunities or current businesses to expand.

DEFRA expects to pay all qualifying applicants; the only condition of qualification is that the claimant must have claimed the Basic Payment Scheme in 2015. Applications are expected to open in early 2022 as a one time offer, those applying will receive a lump sum 2.35 times the average of the payment claimed in a reference period. The reference period is yet to be defined but mooted to be an average of the 2018-2020 claims. The payment will be capped at £100,000 which equates to an underlying reference amount of £42,500.

As a result of the payment all entitlements held by the claimant will be cancelled, including any leased from other parties. The land farmed by the claimant will have to be sold or given away, let for a minimum of 5 years or if tenanted the tenancy will have to be surrendered. The claimant can retain the farmhouse and 5% of their total holding and continue to farm alternative land but without any farm subsidy or work for others in the industry.

The current proposal is that where a partnership is claiming the Basic Payment all partners within the business will be subject to the rules with no test of control or ownership of the farmland suggested. The Central Association of Agricultural Valuers (CAAV) have warned that this could prejudice partnerships where the next generation have already been bought into the business.

The proposed Lump Sum Exit is not additional money but an upfront payment of the remainder of the Basic Payment scheme monies. It is hoped by DEFRA that this fund can be a prompt for conversation between families, landlords and tenants and help to ease negotiations enabling farms to change hands.

De-linking

Meanwhile the Basic Payment is set to reduce in value from 2021-2027 with no payment to be made in 2028. Therefore, as part of DEFRA’s Agricultural Transition Plan they are proposing to delink the remaining payment from the requirement to farm from 2024 in order to simplify the processing of the scheme. The proposal is that to be eligible for the delinked payments you must be farming at the end of 2023 and the value of the future payments will be based on a reference period which is yet to be set. Entitlements will have no function from 2024 and cease to exist, possibly causing a Capital Gain loss where entitlements have been purchased. Cross Compliance will also come to an end in 2024 with a move to a regulatory baseline; grants under the future Environmental Land Management Scheme (ELMS) will pay those acting above this baseline.
 

If you would like further advice on applying for the Lump Sum Exit or future environmental schemes please contact your local Stags Professional on 01392 439046.

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