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Basic Payment Scheme - Lump Sum Exit Scheme details

Basic Payment Scheme - Lump Sum Exit Scheme details

The rules for the Lump Sum Exit Scheme were announced on 12th April. 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 2018 or earlier. Applications are open now until 30th September 2022 as a one-time offer. Those applying will receive a lump sum payment 2.35 times the average of the payment claimed in the reference period. The reference period is an average of the 2019-2021 claims. The payment will be capped at £100,000, which equates to an underlying reference amount of £42,500. Payments are expected to be made from 1st November 2022.

You must transfer out your agricultural land and provide evidence of this to the RPA by 31 May 2024 to receive payment.

As a result of the payment, all entitlements held by the claimant will need to be surrendered, 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.

The government intends to introduce legislation to provide clarity that the Lump Sum Exit Scheme payments will be treated as capital in nature and will be subject to capital gains tax. The existing capital gains reliefs will be available where the qualifying criteria are met.

The rule on partnerships qualifying for the Lump Sum Exit Scheme has changed following consultation and it is now possible for the partnership to continue as long as one or more partners with a combined interest of 50% or more in the business profits leaves the partnership. This will therefore allow parents within a family business, for example, the chance to retire with a lump sum and hand the land and business over to the next generation. Where this happens, the entitlements must still be surrendered and the business can no longer claim further BPS or delinked payments.

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 and landlords and tenants and help to ease negotiations enabling farms to change hands.

Applications should be made through the Rural Payments online portal. If you require further information regarding the rules or require help with an application or submitting evidence of a qualifying transfer then please contact Stags Professional Services team: either Guy Wilson on 01823 662822 or Sally Blowey on 01822 619815.