In 2022 farmers who live in England will be given the option of taking a one-off lump sum to leave the industry in place of further annual direct payments due to end in 2027. The scheme will be available for applicants in 2022 only. It aims to incentivise some farmers to retire and pave the way for the next generation. Consultation ended in August with the rules scheduled to be set out this October.
Payments received will be 2.35 times the average of 2018, 2019, 2020 Basic Payment Scheme (BPS) received up to a maximum of £100,000. This cap will affect those who receive yearly payments greater than £40,000. The tax treatment of the payments is yet to be set out.
If the lump sum is claimed:
- Owners must sell, gift or lease their land (on a 5-year minimum Farm Business Tenancy).
- Directors/ partners of the business won’t be able to claim BPS elsewhere.
- Claimants must have been claiming BPS prior to 2015.
- Tenants will be required to end their tenancies.
- Stewardships may not be entered.
Those who choose to receive the lump sum may retain their farmhouses and 5 percent of their land or 5 hectares whichever is smallest. Claimants will be permitted to work as a contractor or as a part of another farming business. Any Land given up under the scheme may still be used by new occupiers to claim BPS until it is phased out.
Critics say the scheme only addresses exit from the industry and does not go far enough to encourage new entrants. Others say that the 5-year minimum Farm Business Tenancies aren’t long enough, and 10-year tenancies would be more suitable. It seems that smaller farmers and tenants who wish to surrender their leases early are set to benefit the most. The size of and the cap on the lump sum might be less appealing to larger farms. However, the scheme could bring forward some decisions and encourage conversations between landowners and farmers.