Rural Payments Agency Risking Wrath of Farmers

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The Rural Payments Agency (RPA) has managed to spark outrage with its latest gaffe.

More than 600 letters have been sent out to farmers who they think were overpaid under the Basic Payment Scheme in 2015 or 2016. The fact that really grates is that some claimants have been waiting more than 18 months for their underpayments to be rectified. In some instances, this is understood to be worth tens of thousands of pounds.

The Basic Payment Scheme is the biggest of the European Union’s rural grants and payments designed specifically to help the farming industry. Claimants apply once a year – usually in May – and payments begin in December.

However since the scheme began in 2015 it has been fraught with problems, with the majority of payments being late from the off.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Will Brexit Affect the Value of Your Farmland?

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Fears have been expressed by some land agents that agricultural land prices may fall in the UK, as a direct result of Brexit.

It is expected that the amount of subsidies, such as the Basic Payment Scheme, will decline once Britain leaves the EU, causing some farmers to re-consider their financial position.  Many are already struggling to make ends meet and a reduction in subsidy support, combined with a predicted interest-rate rise for borrowing, may result in many being forced to leave the industry.

As a consequence the demand for farmland could fall away, with the price per hectare dropping by as much as £1,000, despite it having remained fairly robust so far, at an average of around £7,500 for bare land.

However, even the experts admit it is difficult to predict the full impact of Brexit, with so many other factors coming into play, such as trade tariffs, pricing and food imports.  Post-referendum predictions of economic doom and gloom have not yet come to pass, so those in the industry would be wise not to panic at this stage.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

HMRC Warns Farmers To Declare Subsidies On Tax Returns

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Farmers claiming the BPS are being reminded by HM Revenue & Customs that these support payments must be included on their tax returns to avoid possible fines.

Several farmers have been written to by HMRC reminding them that subsidies are taxable and need to be declared on tax returns.

Some may be worried by the letters, whereas in most cases BPS payments have already been included on the returns. Fines for not declaring income can be up to 60% plus interest, so if you are in any doubt, it is worth asking an accountant to check for you.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of adamr at FreeDigitalPhotos.net

 

Basic Payment Scheme Will Be Flat Rate

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It has been announced that the Basic Payment Scheme for Wales will be paid at a flat rate over the whole of Wales by 2019. In addition Welsh Ministers have decided to apply an ‘add on’ known as the Redistributive Payment for the first 54 hectares of a claim.

It is great to have a decision on this, so that the chances of receiving the BPS in good time are improved. However, we do not yet know the details of how it will be applied or whether any groups of farmers will feel that this solution should be challenged as well.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

The Importance Of The Rural Economy In Wales

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Rural Businesses contribute more than 440,000 jobs and in excess of £13 billion to the Welsh economy.

Do your Assembly Members know how important the Rural Economy is in Wales?

If you want to keep them informed or register your concerns you can email both your individual and regional AM’s (there are 5 in total) and can find their details here.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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Prepare For Delays In Receiving Basic Payment Scheme

11702540563_45cdb2e171_zDue to the complexity of the new Basic Payment Scheme there is a risk that payments may be delayed which will have a major cash flow impact for farm businesses. The payment window is 1 December 2015 to 30 June 2016.

It is very important to prepare for this as part of your cash flow planning for this year. In particular you may need to arrange extra funding facilities.

NatWest and RBS have just announced that they are making interest only loans available to farming customers across the UK to bridge this gap.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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Basic Payment Scheme – Are You Ready?

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Farmers are being reminded that the 2015 deadline for applying for the new Basic Payment Scheme is now fast approaching.

There has been some pressure on the Welsh Government to extend the May 15th deadline (as granted in England) but there is no sign of this happening. Applicants should complete and submit their forms earlier rather than later.  In fact, extending the deadline may not be beneficial, as this would undoubtedly delay the first payments, currently expected in December 2015, and this could cause some strain on farmers’ cash flow.

Using the on-line Rural Payment Wales application is also recommended where possible. There have been some minor issues with the on-line system, but it is generally robust and easy to use. It provides a way of submitting more accurate data, hence saving on wasted application time where paper forms have been incorrectly completed. However, for those having difficulty with access to adequate Broadband (still a problem in many rural areas), it is still not too late to apply by post.

For any further help or advice, contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Capital Losses On Single Payment Entitlements

www.greenandco.comIf you have made a Capital Gain selling assets it is important to check whether you can save tax by using the Capital Losses from purchased Single Payment Scheme entitlements.

In Northern Ireland, Scotland and Wales all Single Payment Scheme entitlements ceased to exist on 31 December 2014. This means that the cost of purchasing those entitlements is now a Capital Loss which is allowable against other Capital Gains made on the sale of assets.

However in England the Single Payment Scheme entitlements were converted to the new Basic Payment Scheme entitlements so there is no Capital Loss.

It just goes to show – England don’t always win!

For more information, contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Greening In Wales

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As part of Common Agriculture Policy Reform, farmers need to demonstrate compliance with Greening measures to receive Basic Payment in 2015 in full, 30% of the payment made of this Greening element.

The Welsh Government have just published a Guide to the Greening Rules which will not be a quick read for most.

The Key points are:

  1. Crop Diversification
  • If 10 – 30 Ha of arable land – need at least 2 arable crops (main crop not more than 75% of arable land).
  • 30+ Ha of arable land – need at least 3 arable crops (main crop no more than 75% and 2 main crops not more than 95% of arable land).

A full list of eligible crops is now published  (note: arable land includes fallow land and temporary grass of less than 5 years).

There are a list of important exemptions including:

Exemptions for those with more than 75% of eligible agricultural land as grassland  (permanent and temporary) and for those with more than  75% of arable land as temporary grassland and fallow.

  1. Ecological Focus Areas (EFA)

Basically, farms with over 15 Ha of arable land will need 5% as EFA. Features eligible for EFA are fallow, hedges, stone walls, short rotation coppice, afforested land and nitrogen fixing crops.

Again there are exemptions e.g. if more than 75% of eligible agricultural land is grassland (permanent and temporary) or if 75% of arable land is temporary grassland, fallow and legumes.

Details are now published of how to calculate EFA area for the linear features (hedges and stone walls).  The complexity continues as it depends whether hedges border arable land or permanent grass.  Welsh Government will want those EFA areas identified by the end of October 2014.

Every farm in Wales will need to assess their Greening requirements on an individual basis, they will need to see if they are exempt or if changes are required to comply. Remember cropping this Autumn will need to be compliant.

We would like to thank David Thomas of Andersons for allowing us to use his article. He can be contacted via email at:  dthomas@theandersonscentre.co.uk

The Future of Farm Support – the CAP Deal

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A deal on Europe’s farm support system was agreed in Brussels on 26 June, the new Basic Payment Scheme (BPS) will replace the Single Payment Scheme in 2015.

In many ways it will be very similar, with entitlements having to be matched against eligible land which then generates a yearly payment as long as certain land management rules are followed (cross-compliance). However there will be more emphasis on flat rate regional payments and a larger ‘greening’ element. Some key aspects of the changeover are:

  • Entitlement Roll-over. Countries operating the flat rate regional payment scheme (like England) will be able to rollover existing entitlements into the new scheme.
  • Entitlement Grant. Countries operating the historic system (including Wales) will be required to issue new BPS entitlements. The reference year for creating entitlements will be 2014. Rather than a link back to claimants in 2011, the grant of entitlements will only go to those who made an SPS claim in 2013. There will be a ‘national reserve’ set up, comprising up to 3% of funds to deal with hardship claims.
  • Convergence. For countries currently operating the historic system (like Wales) there will be no requirement to transfer to a fully flat rate system. By 2019 Member States are only required to ensure all farmers get at least 60% of the average regional payment. On top of this, losses for individuals can be limited to 30% of their present payment which may be used in Wales.
  • Capping. Payments above €150,000 may be cut by 5%.
  • Conversion Rate. For countries outside the Euro the conversion rate can be the average of exchange rates in September. This is instead of simply using the official 30th September exchange rate and should help reduce the effect of currency fluctuations.

The Basic Payment Scheme will form the bedrock of the new support arrangement, but there will be a complex system of top-up payments possible. In particular there will be a compulsory Young Farmers Scheme. It will be funded by 2% of the total BPS budget and provide a 25% top-up in the value of entitlements to those under 40 years of age for five years. There will be a limit on how many hectares qualify but the maximum top-up is likely to be about £3,500 per year.

GREENING

The concept of getting farmers to provide environmental benefit in return for their direct payments is seen as a way of making farm support more acceptable to Europe’s taxpayers.

  • Crop Rotation. On arable areas of 10-30 hectares two crops will be required. Three crops will be needed when the arable area is above 30 hectares. No crop should cover more than 75% of the farm area and the two main crops together should be a maximum of 95% of the area.
  • Permanent pasture. There is still a requirement to retain at least 95% of the permanent pasture area compared with a base year. The permanent pasture ratio is likely to be set at a national level as at present.
  • Ecological Focus Areas. EFAs will initially be set at 5% of a farm’s eligible arable area. Countries will be able to choose from a list of possible features to decide what qualifies as an eligible EFA. This includes landscape features (hedges and trees), buffer strips, fallow land, protein-fixing crops, agro-forestry and short-rotation coppice. Some features may carry extra weight – e.g. one hectare of especially environmentally valuable land could contribute 2 hectares of EFA. EFA would not be required on farms where more than 75% of the land is grassland (subject to a 30 hectare maximum).
  • Payments. 30% of the BPS funding goes to greening.
  • Penalties. Penalties for not complying with greening will not be introduced until 2017.

There are a number of financial issues outstanding which will be dealt with as part of  future EU Budget negotiations. The National Governments will have to make decisions about how they implement the reforms this Autumn.

Please contact us if you want to discuss how this will affect your business.