The Government produced its response in February 2022 to the consultation exercise last year on the Lump Sum Exit Scheme. This scheme offers farmers a one off optional lump sum payment in place of direct payments and is intended to address issues of farmers wishing to retire or leave the industry and freeing up space for the next generation. It will sit alongside extra support to help new entrants into the industry. The 2022 Regulations came into force on 26 March 2022 and provide that a lump sum may be payable in lieu of direct or delinked payments if the applicant satisfies certain eligibility conditions laid down in the regulations.
Applications may be made now with a deadline of 30 September 2022 and forecast statements can already be requested. Applicants must have claimed and be eligible for Basic Payment Scheme payments in the 2018 scheme year or inherited land or succeeded to a tenancy after 15 May 2018.
Before receiving the lump sum the claimant must have transferred any agricultural land at their disposal as of 17 May 2021 or rights of common and surrendered all English BPS entitlements to the RPA. Owner occupiers must transfer by sale, gift or renting out under an FBT of at least 5 years. Tenants must transfer by surrendering or assigning their tenancy or succession.
Procedure for claiming and amount payable
The first step is to request a forecast statement and submit evidence of qualification. The payment will be a 2.35 multiple of the BPS average payment for 2019-2021. The cap will be £100,000. The lump sum payment will be reduced if not enough English BPS entitlements are surrendered for example if entitlements have been sold or leased out since the BPS 2021 claim.
Partnerships and Companies
If members of a partnership or company wish to retire the partnership or company can apply if a partner with 50% of the profits leaves the partnership or a shareholder with 50% or more of the equity. Once the lump sum is paid however the remaining business cannot claim further BPS payments.
Tax treatment of Lump Sum Payments
Legislation is to be introduced to confirm Lump Sum exit scheme payments will be treated as capital and be subject to capital gains tax or corporation tax if applicable. Reliefs may be available however where qualifying conditions are met.
General Consequences of a Claim
The claimant may not be able to participate in further schemes and will not be eligible for more BPS or delinked payments in England. Meeting the Exit scheme rules may mean rules of other schemes such as Countryside Stewardship are breached, and money may need to be repaid. Recipients will not be eligible to enter new agreements like the Sustainable Farming Incentive.
Further advice is on the RPA website but the procedure is complex and landowners and tenants should take professional advice on the full implications of the scheme and any effect on the conditions attaching to other schemes like the Countryside Stewardship.
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