English farmers to be offered lump sum to exit the sector
In 2022 farmers in England will be able to take a lump sum payment of up to £100,000 instead of any future Basic Payment Scheme (BPS) money on the provision that they stop actively farming.
Announcing a consultation on the proposals on Wednesday, Defra secretary George Eustice said that by renting out their farm or surrendering a tenancy, it will create opportunities for young farmers and those who want to expand their farms.
To be eligible for the lump sum a farmer must have claimed BPS in 2015 or before. Where a farmer owns their land, Defra proposes that it should be leased out for at least five years. Their entitlements will be cancelled.
The calculation of the actual lump sum is to be based on a reference period, likely to be the average of BPS monies received in 2018 to 2020. This average will then be multiplied by 2.35, so for a farmer with a reference amount of £40,000, the lump sum is £94,000. A cap of £100,000 is proposed.
The 2.35 figure means that the lump sum (except for those affected by the proposed cap) is roughly equivalent to the amount the farmer would have received in BPS from 2022 to 2027. In England, BPS is being gradually phased out. All payments will be cut in half by 2024 and will end in 2027.
One issue still to be resolved is the tax implications for those who take the payment.
“We are discussing this with HMRC and guidance about the tax treatment will be provided in due course,” states the Defra document.
As well as the lump sum payment, Defra has also confirmed that it intends to de-link all BPS funds from 2024 onwards.
This means BPS claimed by English farmers from 2024 – 2027 will not be linked to land area, potentially allowing farmers to downsize their operations or lease out land without any implications for their payments.
“The introduction of de-linked payments should also help to further speed up restructuring of the farming industry,” states the Defra document.
The UK government also believes that phasing out BPS will lead to reductions in the cost of renting land, and that de-linking payments should hasten this trend.
The consultation on both issues closes to responses on 11 August 2021.