Category: Policy & Business

The latest agricultural rents data from Defra shows a mixed picture.  The All Farms rent for Full Agricultural Tenancy (FAT) (i.e. Agricultural Holdings Act (AHA) agreements) in 2022/23 has decreased by 7% from the previous year to £165 per hectare; the lowest it has been in the last 10 years.  This is driven by the decline in rents for Cattle and Sheep farms, in particluar, those in LFAs, which saw the largest fall, decreasing by 27% to £52 per hectare.

The All farms rent for Farm Business Tenancy (FBT) agreements have risen marginally in 2022/23 to £228 per hectare (a 1% increase).  Other than Cereals and General Cropping farms, all farm types saw an increase in average annual rent per hectare.  In stark contrast to AHA rents, LFA Cattle and Sheep Farm FBT rents have seen a significant uplift from £87 per hectare to £108 per hectare (24%).

Some sectors have experienced a rise in AHA rents whilst at the same time seeing a fall in FBT rents; for other sectors it is vice versa.  The table below shows a summary of the last three years.

Defra’s Farm Rents publication uses data from the Farm Business Survey.  Due to the time taken to collect the data, it is somewhat historic.  The figures just published are for the 2022/23 year – March to February (shown as ‘2022’ in the table below).  The full statistical notice can be found at https://www.gov.uk/government/statistics/farm-rents/farm-rents-in-england-202223.

Cereals farms on AHA Tenancies after quite a large decline in 2021 have seen an increase, although not back up to 2020 levels.  In contrast Cereal FBT rents continue to fall.  It’s a similar picture for General Cropping Farms, with an increase for AHA rents, but a continual decline for FBT rents.  Rents for Dairy land remain strong, particularly FBT rents.  LFA Grazing rents show a very confusing picture, with a strong uplift in FBT rents but a significant fall in AHA rents.  Lowland Grazing Livestock rents also show a fairly large decline for those on AHAs, whereas FBT rents remain fairly steady over the year.

As written previously, data on rents can fluctuate annually and one year’s information should not really be taken in isolation.  In general, rents have been on an upward trend, but looking to the future it would be expected that, as the BPS is phased-out, then overall rents will fall.  

 

 

Agricultural Property Relief

It has been confirmed that the existing scope of Agricultural Property Relief (APR) will be extended to include land managed under agri-environmental agreements.   Qualifying land must be managed under an agreement with, or on behalf of, the UK Government, Devolved Administrations, Public Bodies, Local Authorities or approved Responsible Bodies.  The latter relates to the new Conservation Covenents.  The extension applies to all parts of the UK and is to be effective for transfers (lifetime or on death) from 6th April 2025.  This means farmers and landowners taking part in such schemes, which in England covers the Sustainable Farming Incentive, Countryside Stewardship (Environmental Stewardship) and Landscape Recovery, as well as the England Woodland Creation Offer and other similar schemes will be eligible for APR and exempt from Inheritance Tax.

For land to be eligible, it must have been agricultural land for at least two years immediately prior to the land use change.  HMRC will provide guidance on the necessary evidence in due course, but this is not expected to be too onerous as, in some cases, a considerable amount of time may have passed before it is required.  The relief will be available where there is an agreement in place for the environmental land management scheme on or after 6th March 2024.  This includes an agreement entered into before 6th March 2024 if it remains in place on or after 6th March 2024.  Furthermore, the relief will continue to be available where an agreement has finished.  On the conclusion of an agreement it may be possible to return the land to agricultural use, but if this is not the case, it will still be eligible if the land continues to be managed in a way that is ‘consistent with that agreement’.

In terms of buildings, including farmhouses, being used in connection with the environmental land, they will qualify for APR where ‘that building is occupied with, and that occupation is ancillary to, environmental land’.  As currently, they must be of a ‘character appropriate to the environmental land’ to qualify for the relief.

Business Property Relief (BPR)

There will be no change to BPR.  The Government has confirmed if the land is still used in the business and the overall business is not mainly making or holding investments, BPR could be available.  Furthermore, land that is used to generate Carbon Units via the Woodland Carbon Code or the Peatland Carbon Code should qualify for BPR.

The announcement follows a consultation by the Government announced in last year’s Budget.  It will remove a significant barrier to Tenant farmers entering schemes by removing the risk that Tenants’ participation will endanger Landlord’s eligibility for APR over that land.  We had been anticipating that APR would extend to cover at least land entered into the SFI in England as this scheme is one that farmers are told can be entered into ‘alongside’ commercial farming.  This announcement goes beyond that and removes the ‘APR barrier’ for land owners entering longer-term agri-environmental schemes.

The Chancellor, Jeremy Hunt, delivered what is likely to be the last Budget before a General Election on the 6th March.  With Government finances constrained, the scope for a pre-Election giveaway was limited.  He did find some room for tax cuts however.  The main points are set out below;

• The ‘headline’ measure was a cut in National Insurance (NI) for employees and the self-employed.  Class 1 NI will drop from 10% to 8% as from 6th April (it was at 12% until January this year).  The Self-employed Class 2 NI will be reduced, as will Class 4 – from 9% to 6%
• There was less good news for employers, with it bening confirmed that the National Living Wage would rise to £11.44 from the 1st April
• The other ‘crowd-pleasing’ measure was on Child Benefit.  For higher-earners this will now start to be withdrawn at £60,000 rather than the previous £50,000
• The Furnished Holiday Lets (FHL) tax regime will be abolished from April 2025 so that short-term lets are treated the same as lomg-term let properties
• The threshold for VAT registration will rise to £90,000 (from £85,000).  The threshold for de-registration will also rise, to £88,000.
• Alcohol duty remains unchanged, as does fuel duty (including the ‘temporary’ 5ppl cut).  There will be a new duty on vapes
• Income tax rates and thresholds remain unchanged.  This means that ever-more taxpayers are drawn into higher-rate bands through ‘fiscal drag’.  Indeed, despite the tax cuts outlined the Budget, the overall tax burden in the UK is set to reach the highest it has been for 70 years, according to the Institute of Fiscal Studies
• Land entered into environmental managment schemes will continue to recieve Agricultural Property Relief (APR) for Inheritance Tax – see following article.

The Farming Equipment and Technology Fund (FETF) is now open for applications for Productivity and Slurry Management grants.  Our article last month (see https://abcbooks.co.uk/grants-for-equipment-technology/) gave details of the grant which, in summary, provides funding towards items that have been pre-identified by Defra to help improve the sustainability and productivity of farm businesses.

The application window for the Productivity and Slurry Management themes runs until midday on 17th April.  Applications for the Animal Health & Welfare grants are not yet open, but should be available later this month.  There has been a slight update to the guidance released last month, the latest can be found at https://defrafarming.blog.gov.uk/2024/03/06/farming-equipment-and-technology-fund-improving-productivity-and-slurry-management-grants-available/.  Applications are made using the new Farming Investment Fund (FIF) application service – this is separate to the Rural Payments service and requires a complete new registration.

The protection of hedgerows in future will be similar to the rules previously in place under Cross-compliance.  Readers will recall that, with Delinking of the Basic Payment in England, the Cross-compliance regulatory framework ended in England on 31st December 2023.  In most cases, these rules are already in domestic legislation and will continue to provide protection to the environment and animals.  But for hedgerows there is no direct domestic equivalent of the hedgerow management measures which were provided for under Cross-compliance and, in particular, GAEC 7a.  Defra therefore consulted on these measures back in June last year (see Bulletin https://abcbooks.co.uk/hedgerow-protection/).

Following the consultation, Defra has confirmed the proposed Regulations will replicate the approach already familiar to most farmers from the previous Cross-compliance rules including;

• a 2m buffer strip measured from the centre of the hedge where no cultivations can take place or applications of fertilisers or pesticides (apart from spot applications to control the spread of invasive or injurious weeds)
• exemptions to the 2m buffer strips will remain for hedgerows under 5 years old and for fields less that 2 Ha
• ban on cutting hedgerows between 1st March and 31st August to protect nesting birds
• exemptions will remain to the cutting ban in certain circumstances – i.e. for hedges next to footpaths or highways if they are obstructing the view or preventing passage, or where it could result in a human or animal health and safety
• an exemption will remain to allow cutting in August where OSR or temporary grass is to be established in that month, provided the RPA has been notified.

Whilst the rules are familiar, Defra is keen to emphasise the approach to enforcement of the new regulation will be different.  In keeping with the message being applied to regulation of other areas such as ELM, it will focus on being ‘fair and proportionate’.  The RPA believe an ‘advice-led’ approach will result in the best outcomes.  There will be another round of consultation on the proposed enforcement regime.  In the meantime Defra has said the new Hedgrow Protection Regulations will be made ‘as soon as Parliamentary time allows’.

Woodlands

It has been announced that there will be a new approach to the Woodland Creation Grant in Wales.  In 2024, there will be one window but this will be open from 4th March 2024 until 22nd November 2024, or until the budget has been allocated.  However, the Small Grant – Woodland Creation scheme (for tree planting to create shelterwoods, alongside watercourses, and in field corners or small fields for stock shelter, biodiversity and wood fuel)  will continue to be open for several rounds throughout the year – see table below for dates.

Animal Health Pilot Scheme

A pilot project to assess how closer working between farmers and vets can improve animal health and welfare on farm and also improve productivity is underway in Wales.  Through the project, a small number of vets will deliver regular ‘preventative medicine’ vet visits to achieve improvements in the health and productivity of farmed livestock.  The project is being managed by Welsh Lamb and Beef Producers (WLBP) and lessons learned will inform proposals for the Animal Health Improvement Cycle (AHIC) which will form part of the Sustaining Farming Scheme (SFS) due to commence in 2025.

Application dates

The table below summarises the scheme opening dates in Wales for the coming year;

 

Defra has launched a grant funding competition to identify a new ‘Forest for the Nation’.  The competition, which is inspired by the success of the original National Forest in the Midlands, will see one winner receive up to £10m to fund their project.  There will also be mentorship from the National Forest Company.  Stage 1 of the competition closes on 18th March.  For more details go to https://www.gov.uk/government/publications/forest-for-the-nation-competition#:~:text=Details,the%20Midlands%20since%20the%201990s.

 

 

On 30th January, the DUP endorsed UK Government proposals to restore power-sharing in Northern Ireland (NI).  Central to these proposals were changes to how the Windsor Framework (the UK-EU deal on implementing the NI Protocol) is to be operated.  From an agri-food perspective, these key changes include;

• ‘Not-for-EU’ labelling: the original Windsor Framework envisaged that this would apply in NI only, insofar that goods (e.g. pizzas, cheese etc.) shipped from GB to NI, and intended for final use in NI, would carry this label.  The Government now proposes that this be extended across GB also (from October 2024) and has initiated a consultation on this.  This will add some additional labelling costs for UK agri-food processors, but it was a key for the DUP which views anything that it perceives as undermining Northern Ireland’s integral place within the UK, very negatively.
• Unfettered access for qualifying NI goods: changing the UK Internal Market Act (IMA) to reinforce the policy of unfettered access for qualifying NI goods (e.g. beef) onto the GB market.
• Qualifying Northern Ireland goods rules: tightening the definitions to help to ensure that only NI traders benefitted from unfettered access to the UK and that traders from elsewhere (e.g. Republic of Ireland) would not simply re-route goods through Northern Ireland to avoid border checks which are in the process of being introduced under the UK Border Target Operating Model.
• Internal market system for goods entering NI: this would replace the ‘green lane’ system under the original Windsor Framework agreement and aims to further reduce burdens and formalities for goods entering NI from GB.  The details are yet to be announced but the UK Government is seeking an EU agreement to expand the list of agri-food goods that can enter NI (from GB) via this lane.
• Intertrade UK: a new body will be established to promote trade within the UK.
• Legal obligations when introducing new primary legislation: ministers will be required to consider whether any new primary legislation would affect trade between Northern Ireland and other parts of the UK because of future divergence from EU rules.

In addition to the points above, there were also amendments designed to assuage DUP concerns around NI’s constitutional position within the UK.  Furthermore, the UK Government has committed to provide an extra £3.3 billion in funding for the NI Executive to help to stabilise NI’s public finances and to tackle issues like healthcare.

Coincidentally, the latest proposals also includes the intention to complete the devolution of Corporation Tax to Northern Ireland.  This will effectively give NI scope to reduce its rate to the same level as the Republic of Ireland (currently at 12.5% for small companies and 15% for large companies with annual turnover exceeding €750m).  This would be an important step in making NI more competitive for inward investment and could bolster the NI economy.  Some, however, would claim that it smacks of ‘cakeism’ on the DUP’s part – on the one hand it does not want Northern Ireland to be any different than the rest of the UK, but when it suits, it is happy for NI to have a lower Corporation Tax rate.  That said, it is a relatively small price to pay and it might help to reduce NI’s reliance on Westminster public funding in the longer term.  What is key now is that the NI Executive gets down to work and delivers for the people of Northern Ireland, not just in agriculture, but across the economy generally. 

A reminder that claimants in England have until midnight on 29th February 2024 to query any Delinked Payment decisions.  Furthermore, any BPS payment decisions notified to claimants before 1st January 2024, but which have not been queried with RPA yet, also have until 29th February to raise a query.

From now on, BPS claimants will simply have 60 days in which to make a query as a new fixed 60 day deadline has been implemented.  The 60 days starts on the ‘date of notification’.  This is the date the RPA emails or writes to claimants giving notification of a payment decision – for example, a payment remittance or even a response to a previous payment query.

If claimants are unhappy with a decision they are encouraged to follow the 3-step complaints procedure – Query, Complaint, Appeal.  Further information including links to the relevant query forms can be found via https://www.gov.uk/government/organisations/rural-payments-agency/about/complaints-procedure.

 

On 3rd February, the Northern Ireland Assembly returned after being suspended for two years following a DUP boycott.  Its return is historic as, for the first time, there is a Nationalist First Minister (Sinn Féin’s Michelle O’Neill). The appointment of Andrew Muir as the Agriculture Minister is also historic as it is the first time that the Alliance Party has headed up the Department of Agriculture, Environment and Rural Affairs (DAERA).  The Alliance Party is liberal, centrist and non-aligned (i.e. neither Nationalist nor Unionist).

Mr Muir does not have direct experience of farming and the Alliance Party sees agriculture as being on an equal footing to the environmental and rural affairs aspects of the DAERA remit.  Its 2022 election manifesto placed an emphasis on supporting sustainable agriculture in Northern Ireland.  It included implementing mandatory carbon audits on farms, every five years, to reduce greenhouse gas emissions and promote environmental practices.  It also suggested a ‘Green New Deal’ to promote sustainable agriculture and associated economic growth, including plans to develop anaerobic digestion to tackle ammonia emissions and to encourage habitat restoration and biodiversity.

Northern Ireland’s agricultural policy has evolved since 2022 with the publication of DAERA’s plans in June 2023.  DAERA’s plans include an area-based Farm Sustainability Payment which will provide a basic safety net and is, in many respects, a continuation of the BPS in the short-term.  Coupled payments for the beef sector, contingent on environmental and productivity improvements (reducing calving intervals and age at slaughter), also featured.  Longer term, there are plans for DAERA’s Farming with Nature and Farming for Carbon agri-environment schemes to become the centre-piece of NI agricultural policy, although these plans have to be developed.

It would appear that Mr. Muir is likely to place a heavier emphasis on the environmental aspects of NI agricultural policy, although many of the Alliance Party’s manifesto objectives could be achieved within the policy framework laid-out by DAERA in June 2023.  That said, the new DAERA Minister is also aware of the wider food security issues across the UK which implies an acceptance that maintaining a balance between food production and the environment will be critical to success in his role.  Further information on the latest DAERA proposals for future NI agricultural policy is accessible via: https://www.daera-ni.gov.uk/sites/default/files/publications/daera/Future%20Agricultural%20Policy%20Decisions%20for%20Northern%20Ireland%20%28Final%29%20%28002%29.pdf