2021 has seen the start of a seven-year transition period to abolish the Basic Payment Scheme and replace it with new incentives to encourage a more carbon friendly approach to farming and planned succession, freeing up land for the younger generations.
Farmers wishing to retire can apply for an upfront lump sum payment, up to a maximum of £100,000 to relinquish their Basic Payment Scheme Entitlements and transfer their land.
The payment is subject to eligibility criteria summarised briefly as follows:
- Applications are open from now until the end of September 2022
- Applicants need to be individual farmers or have at least a 50% share in a limited company or partnership.
- Have claimed Basic Payment Entitlements on or before 2018 (with certain exemptions for inherited farms or those who succeeded under an Agricultural Holdings Act tenancy).
- The Lump Sum payment is calculated by multiplying the average Basic Payment Scheme receipts from 2019-2021 by 2.35.
- Applicants must transfer land by selling it, gifting it, renting it out or surrendering their tenancy.
- A tenant with the benefit of an Agricultural Holdings Act tenancy is permitted to assign the tenancy to a successor.
- The land transfers must be completed by the 31st May 2024.
- Farmers are permitted to retain their none agricultural land and residential or commercial property as well as up to 5ha of agricultural land.
- The payment is to be treated as capital and as such will be subject to capital gains tax or corporation tax.
In addition to the above, the Basic Payment Scheme is going to be replaced in 2024 with new grants and incentives to encourage alternative land management, nature friendly practices and increased animal welfare.
The new measures are proving to be an exciting but complex time for the farming sector with lots of new rules to get to grips with and strict deadlines to meet.
This is an ideal time to re assess your farming business practices and to consider succession planning in order to utilise the incentives on offer.
If you would like further advice on the above please give Katie Wright and the team a call on 01482 398376 or email [email protected]