Defra seeks views on a proposed lump sum exit payment for farmers

A consultation has opened seeking views on two key changes to the Basic Payment Scheme.

In 2022, farmers who wish to exit the industry will be offered the ability to take a lump sum payment in return for giving up their direct payments. Defra is hoping that this will encourage farmers to retire and improve opportunities for new entrants to succeed in the industry.

The consultation sets out a mechanism for calculating the amount of payment a farmer may receive and payments would be subject to a cap of £100,000. To qualify the farmer would have to give up their land and the BPS payments would be cancelled. Defra only intends to open the scheme for applicants that have claimed BPS payments since 2015, with some limited exceptions.

Defra is also consulting on delinking Direct Payments so that from 2024 recipients will no longer have to farm land or meet other BPS rules to claim payments.

There are still important technical elements that need to be considered, including mechanisms to ensure the payment system is not abused and the tax treatment on a lump sum payment. For tenants there are questions over whether they can unilaterally give up the entitlements and their interest in the land, as that may involve a surrender which has to be agreed by the landlord. However fundamentally is a payment capped at £100,000 going to provide a sufficient incentive to persuade a reluctant farmer to retire, or will it simply assist those who intended to exit the industry anyway.

Defra has encouraged all those interested in the future of the agricultural sector to respond by 11 August 2021. Defra aims to publish the final rules in October 2021 and applicants may be receiving the payment in the first half of 2022.

For more information on any of the items raised in this article please contact a member of our Agricultural Team.