Category: Policy & Business

England

It seems increasingly clear that farmers (and their advisors) will not have to do anything to claim their de-linked BPS payments this year.  Defra and the RPA have been silent on what might be required.  In the absence of information, there was speculation that claimants might, at the least, have to tick-a-box to indicate they still existed.  There was a school of thought that Defra would not want to give up on the information provided by the annual BPS application, and that some sort of field-by-field submission would still be required.  However, whilst there has been no formal announcment from Defra, ‘stakeholders’ are clearly stating that those due delinked payments will not have to do anything.  The money will simply be paid into bank accounts.  It will come in two tranches – half in August and half in December.  Those budgeting should remember that there will be further progressive reductions this year as the BPS phase-out continues.  See Key Farm Facts for details.

Farmers in England should remember that the deadline for transfering delinked Reference Amounts is the 10th May.  See our article of last month for more details.

One final point is on Countryside Stewardship and Environmental Stewardship revenue claims.  The deadline for these is the 15th May.  These were often done as part of the the overall ‘BPS process’.  With a BPS form to trigger the work, they may get overlooked.

Scotland, Wales & N.I.

Of course, the BPS carries on unchanged in the rest of the UK for the 2024 year.  None of the devloved regions is instituting radical change to their BPS systems for 2024 as all have plans to reform farm support sooner or later.  Therefore, for most, the rules and forms remain unchanged from 2023.  The deadline for the submission of forms is the usual 15th May.  In Wales the entitlement trading deadline is also the 15th May.  In Scotland it is 2nd April.

Defra has provided an update on the development of private nature markets.  This sees companies, organisations and individuals paying for improvements to nature, rather than relying on Government funding.  Defra has an ambition to see £500 million per year coming from these sources by 2027 and rising to £1 billion by 2030.  The paper points to some progress being made – notably the introduction of mandatory Biodiversity Net Gain and the development of Nutrient Neutrality markets.  However, away from these markets created by regulation, we see little evidence of much money being generated for nature from the private sector.  The target of £1bn seems some way away.  The report can be seen at – https://www.gov.uk/government/publications/nature-markets-framework-progress-update-march-2024/nature-markets-framework-progress-update-march-2024#palladium

Defra has announced it will be applying a limit to the area SFI applicants can put into six specific SFI options that are currently available.  Under the announcement made today (25th March), SFI applicants will only be able to put 25% of their land into the following actions that take land out of direct food production;

• Flower-rich grass margins – IPM2
• Pollen and nectar flower mix – AHL1
• Winter bird food on arable and horticultural land – AHL2
• Grassy field corners and blocks – AHL3
• Improved grassland field corners or blocks out of management – IGL1
• Winter bird food on improved grassland – IGL2

The cap will come into effect from midnight tonight (25th March).  After this date Defra will not accept applications where the amount of land in total that is entered into any combination of the above actions is above 25% of a farm’s total land.  Furthermore, Defra has said ‘we want to emphasise that we would expect no more than 25% of a land parcel to be entered into IGL1, AHL3 and IPM2′.  It doesn’t particularly say whether applications wouldn’t be accepted if this was the case.

The new rules do not apply to;

• existing SFI agreements
• any SFI application that is already in progress
• SFI agreements that have already been offered to applicants 

In recent weeks there has been coverage in the media of farmers putting large areas, or even whole farms into these actions.  Defra has been saying that there has only been limited evidence to date of this, but it now acknowledges that some of these actions are ‘being used more than intended in a small number of cases’.  It says the changes ‘will ensure the scheme continues to support farmers to produce food sustainably alongside improving the environment’.

The Farming Equipment and Technology Fund (FETF) is now open for applications for the Animal Health and Welfare grants.  Our article last month (see https://abcbooks.co.uk/grants-for-equipment-technology/) gave details of the grant.  In summary, this provides funding towards items of equipment and technology that have been pre-identified by Defra to help improve animal health and welfare on farms.  There are over 130 items on the list and 29 are new additions.  The minimum grant is £1,000 and the maximum is £25,000 and, under the Animal Health and Welfare grant, applicants can receive 50% towards the lower of either the cost set out on the list or the actual cost paid for the item.

Applications are scored (each item has a score), so it is possible not everyone will receive a grant, but applicants can increase their score by 20% if they provide evidence that they have discussed the application with a vet.

The application window runs until 1st May 2024.  The full guidance can be found at https://www.gov.uk/government/publications/farming-equipment-and-technology-fund-2024.  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.  A reminder that the application window for the Productivity and Slurry Management grants via the FETF opened earlier in the month (see https://abcbooks.co.uk/productivity-and-slurry-grants-open/) and runs until midday on 17th April 2024.

The Land Reform (Scotland) Bill was laid before Parliament on 14th March 2024.  The proposals include measures which will apply to large rural landholdings of over 1,000 hectares, prohibiting sales in certain circumstances until Ministers have considered the impact this will have on the local community.  This could result in large holdings being split into smaller lots to help local communities be able to buy them.  In addition, the Bill will introduce advance notices for the sale of some large landholdings; again this would be to give local communities more opportunity to raise funds so thay can own their own land.  The Bill will also place legal responsibilities on these largest landowners to show how they use their land and ‘how that use contributes to key public policies’ – i.e. climate change and protecting and restoring habitats.  They will also have to engage with local communities about how they use the land.

In other proposals, Scottish Ministers would have a duty to publish a model Land Management Tenancy – Environmental Tenancy to cover;

• regenerative and sustainable agriculture
• uses contributing to achieving net zero
• climate change
• sustaining or increasing biodiversity.

There are also proposals to revise Tenancy legislation in the following areas;

• compensation for improvments, including improvments which enhance sustainable or regenerative agricultural production
• extending Tenant’s diversification to cover environmental benefits
• compensation for game damage
• rent reviews – including the productive capacity of the holding, rent payable on similar holdings, economic conditions of relevant agricultural sectors, open market rent for Landlord’s fixed equipment not used for agriculture, and open market rent for land not used for agriculture
• the rules for good estate management and rules of good husbandry to include references to sustainable and regenerative practices

The full Bill can be found at https://www.gov.scot/news/land-reform-bill/.

A reminder that, although we don’t have a BPS claim to complete this year, Countryside Stewardship and Environmental Stewardship Revenue claims still have to be made.  Defra has confirmed the window is now open and will close on the usual 15th May.  Late claims, up until 2nd September, are possible but penalties will be applied to these.

The claims process will be the same as last year.  This can be done online via claimants’ Rural Payments accounts and there is the option (introduced last year) to use the more straightforward annual declaration if no changes have been made.

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.