Sustainable Farming Incentive Pilot

The RPA has issued the first batch of quarterly payments under the Sustainable Farming Incentive (SFI) Pilot.  These have been made to those participants whose agreements commenced on November 1st 2021.  Not all applications had been processed by this initial start date, but offers have been sent out on a regular basis since.  As of 18th February, 826 agreements have been offered, with 769 accepted and a further 57 still awaiting acceptance.  There are also 73 applications still being processed.  Pilot participants are now able to apply for capital items, see Bulletin article https://abcbooks.co.uk/countryside-stewardship-6/

Farm Equipment & Technology Fund

Defra has started to send out Agreements for the first round of the Farming Equipment and Technology Fund (FETF).  Successful applicants need to accept their Agreements by midnight on 4th March, via the dedicated FETF acceptance portal.  They then have until midnight on 31st October 2022 (extended by one month) to buy and install the items and submit a claim for payment.

The FETF is part of the Farming Investment Fund (FIF) offering grants of between £2,000 and £25,000 towards the cost of specific capital items identified to improve farm productivity in a sustainable way.  The first round was significantly over subscribed.  Defra received 5,624 eligible applications worth a total value of just over £53.5m; three times the initial allocation for the fund.  Of these 4,376 have been offered Grant Fund Agreements (GFA) totalling over £48.5m.  The scheme is competitive and items in an application are scored on how they meet the following criteria:

  • productivity
  • animal health and welfare
  • environmental benefits, including biodiversity

Defra is encouraging those who were unsuccessful this time to apply in the next round, which is expected to open later this year.  Defra is  reviewing all the feedback from this round to help inform the design and operation of the next round.  In the coming weeks it will be asking  farmers and stakeholders for input in reviewing the list of items eligible for grant funding in future rounds.

Slurry Grants

Both Defra and the Scottish Government have recently made announcements regarding funding towards improving slurry management on farms.

Scotland

In Scotland the Sustainable Agriculture Capital Grant Scheme 2022 (SACGS) will open in the spring, offering support towards the purchase of low-emission slurry spreading equipment and slurry store covers; both proven to reduce ammonia emissions.  Full scheme guidance is not available yet, but Scottish farmers, crofters and agricultural contractors who store and/or spread livestock slurry or digestate will be able to apply for the grant.  All businesses will need to be registered with the SGRPID.  Grants will be based on standard costs.  In the pilot (see below) this was at 50% or 60% in the Highlands & Islands, with a £20,000 maximum grant for a single business.  The scheme is expected to be open for 6 weeks in the spring for applications.  If an application is successful a Carbon Audit and Nutrient Management plan will be required.

The SACGS Pilot Scheme launched in autumn 2020 offering grants towards the cost of specific items identified to reduce GHG emissions and improve land and livestock management.  It seems this round is just concentrated on improving slurry management.

England

In England Defra has previously implied there would be a separate Slurry Investment Scheme available in autumn 2022.  The latest from Defra is that support for slurry management equipment and technology will be integrated into the Farming Investment Fund (FIF), rather than a separate scheme.  Readers will recall the FIF has two ‘levels’ – the Farming Equipment & Technology Fund (small grants for a specific list of items) and the (larger) Farming Transformation Fund.  Both have already offered funding for improving slurry management, but Defra will be inviting views on how to improve this in future rounds.  It is likely that a round within the Farming Transformation Fund will open this autumn, offering significant grant contributions to help farmers achieve 6 months storage capacity.  The scheme, if over subscribed, could be competitive and therefore projects maximising environmental outcomes will prioritised.  More information is expected through the spring and we will endeavour to keep readers up-to-date.

 

BPS 2022

This year the Basic Payment Scheme will open for applications in England on 15th March.  It is already possible to transfer land and entitlements online in preparation (see article https://abcbooks.co.uk/land-entitlement-transfers-3/) As 15th May falls on a Sunday this year, the deadline for applications (without a penalty) including Young and New Farmer, applications is midnight on 16th May.

It is still possible to make a late application up until 10th June but this will attract penalties.  However, it is also possible to make certain changes to a claim that was submitted by 16th May, without penalties up until 10th June.  These include;

  • changing the land use of a parcel
  • increasing the eligible area of a land parcel
  • increasing the area you want to use to activate your entitlements
  • adding a land parcel

Countryside Stewardship

The Countryside Stewardship scheme is now open for applications in England.  This includes;

  • Mid-tier – Open from 8th February to 29th July 2022 for agreements to commence on 1st January 2023.  This year, it is possible to apply online for Mid-tier via the Rural Payments service, meaning it is no longer necessary to request a pack.  But for those who prefer not to, or are unable to apply online, packs can be requested via Rural Payments by 5th July.  If it is not possible to go online, requests for packs by telephone or email must be made by the earlier date of 27th May.  The last date to request Catchment Sensitive Farming Approval or Natural England approval (required for certain options) is 20th May.  For more information go to https://www.gov.uk/guidance/mid-tier-and-wildlife-offers-manual-countryside-stewardship
  • Wildlife Offers – These are also open for applications from 8th February to 29th July 2022.  As previously, online applications are preferred, but where this is not possible, packs must be requested by 5th July.  The Wildlife Offers are meant to be quicker and simpler to apply for.  Unlike the Mid-tier, they are not scored, meaning all eligible applications will get an agreement.  There are no capital items included in the Wildlife Offers, but it is possible to apply for a standalone Capital Grant (see below) alongside a Wildlife Offer. For more information go to https://www.gov.uk/guidance/wildlife-offers-countryside-stewardship
  • Higher-tier – The application period commences on 8th February.  The deadline for submitting a Higher-tier initial application is 29th April with the final application to be submitted by 31st August.   The deadline for requesting an application pack (online, email or post) is 31st March.  Higher-tier includes woodlands, commons and environmentally significant sites (eg.SSSIs).  For more information go to https://www.gov.uk/guidance/higher-tier-manual-countryside-stewardship
  • Capital Grants – From the 8th February 2022, Capital Grant applications are now open all year round.  Further information can be found at https://www.gov.uk/guidance/countryside-stewardship-capital-grants-manual.  Readers will recall the Capital Grants offer was expanded last year so it now offers standalone capital items within three areas;
    • Boundaries, trees and orchards
    • Water quality
    • Air quality
  • SFI Pilot Capital Grants – It is now possible to make a Capital Grants application to support SFI Pilot Standards.  Those wishing to make an application need to read the Countryside Stewardship Capital Grants (SFI) supplement first (https://www.gov.uk/guidance/countryside-stewardship-capital-grants-manual-from-8-february-2022-sustainable-farming-incentive-pilot-supplement).  This will direct them to the relevant sections in the 2022 Capital Grants Manual.
  • Protection and Infrastructure Grant – This is a new standalone capital grant open all year round from 8th February 2022.  It is a two year capital grant for support to create Woodland Infrastructure (FY2).  Further information can be obtained via https://www.gov.uk/guidance/protection-and-infrastructure-countryside-stewardship
  • Other CS grants remain open all year round, these include;
    • Woodland Management Plan grant
    • Woodland Tree Health grant
    • Implementation Plan (PA1) and Feasibility Study (PA2) grants – funding for more complex projects – speak to a NE advisor first

Lump Sum Payments

English farmers will be able to take their future BPS payments in a ‘lump sum’ retirement payment this year.  Defra has (finally) released its response to the consultation undertaken last year (see article https://abcbooks.co.uk/lump-sum-and-delinking/)  This was originally expected in the autumn, but has been repeatedly delayed.  The response now published (see https://www.gov.uk/government/consultations/direct-payments-to-farmers-lump-sum-exit-scheme-and-delinked-payments) re-affirms the option will be available this spring and sets out the rules in more detail.  Precise scheme rules will only be known when the secondary legislation to enact the scheme is passed.  We probably now know enough for sensible business decisions to be made, however.  More details have also been released on the ‘decoupling’ of BPS payments which was consulted on at the same time.

Lump Sum Payments

A summary of the scheme is as follows;

  • The Lump Sum scheme will open in April 2022 and run until 30th September 2022.  More detail will be provided at this time, including how businesses that have changed through mergers and splits will be treated.  It will not be a competitive scheme – anyone who meets the criteria will get the payment.  It is envisaged that the Lump Sum is only going to be available in 2022 – if it is not applied for this year, the opportunity will be lost.   BPS claimants will be able to request a statement setting out how how much Lump Sum they are eligible for
  • Lump Sum payments would be made in November 2022 (or as soon as the requirements of the scheme on land transfers – see below – have been met)
  • To qualify, applicants must have made a BPS claim in May 2018.  There will be exemptions for those that have inherited a farm or succeeded to an AHA tenancy since 2018 as well as rules on mergers and splits of businesses between 2018 and now
  • The payment will be based on the average BPS paid in the three years 2019, 2020 and 2021 (the reference period).  The figure for 2021 will be before any Agricultural Transition deductions.  This average sets the ‘reference amount’.  This will be capped at £42,500 (this is equivalent to around 185 hectares or 460 acres).  There will be a standard multiplier of 2.35 to arrive at the value of the lump sum.  Therefore the payment will be limited to £100,000
  • If the applicant has already reduced their entitlements compared to the reference period, their lump sum will be reduced proportionally
  • Those who take up the Lump Sum will not be able to apply for any new agreements under other support schemes such as the SFI or CS.  The Lump Sum will need to be paid back if these schemes are entered into
  • Applicants must give up their farmland if they apply to the scheme.  They can keep residential and commercial property, non-agricultural land and up to 5 hectares of agricultural land.  The land that must be transferred is that which was held on the 17th May 2021.  If some of this has already been transferred, the transfer meets scheme rules, and the applicant has kept the entitlements, this would be eligible for the lump sum payment.
  • The transfer of land includes sale, granting a tenancy (which must be for more than 5 years), gifting it, or relinquishing a tenancy.  Where there is an AHA with succession rights, the transfer to a successor will be eligible for the scheme.  It will also be possible to put land held at the 17th May 2021 into woodland planting and claim the Lump Sum.  Sole traders will not be able to transfer to a spouse or civil partner
  • Applicants will have until 31st May 2024 to complete their transfer (useful if notices have to be given on tenancies or sales negotiated).  It will be possible to apply for the Lump Sum this year and still claim the BPS in 2022 or 2023 if the transfer is not complete.  Any BPS payments made in 2022 or 2023 would be deducted from the Lump Sum – it would be treated as a ‘prepayment’ on the Lump Sum.  
  • The rules on Partnerships and Limited Companies have been made more flexible since the original proposal.  Where Partners or Shareholders (either singly or jointly) have at last a 50% interest in a business they will be able to apply for the Lump Sum.  All entitlements held by the business would be cancelled.  However, any remaining Partners or Shareholders will be able to enter into new land management agreements
  • The tax treatment of the Lump Sum payment has been clarified.  Legislation will be introduce to ensure that the payments are treated as capital rather than income.  Therefore, they will be taxed under Capital Gains Tax (or Corporation tax for companies) and be eligible for CGT reliefs.  This treatment will also apply to any ‘interim’ BPS payments still claimed in 2022 and 2023 whilst the transfer of land is being sorted-out.

To help with ‘generational renewal’, Defra is also planning a New Entrants scheme.  More details are promised later in the spring.

As we have written in the past, the Lump Sum will probably only be of interest to a quite small number of English farmers.  Now more details are available, at least they and their advisors will be able to work through the options and see whether it makes sense on a case-by-case basis.  Further information and details on how to request a forecast statement of the Lump Sum can be found at – https://www.gov.uk/government/publications/lump-sum-payments-for-farmers-who-leave-or-retire-from-farming-and-delinked-payments

De-Linking

As previously outlined, this will not happen until 2024.  It appears that a claim (of some sort) will have to be made at May 2023.  This might mean some claimants keep hold of the minimum claim area of 5 Ha in 2023 just to preserve the right to De-Linked payments.  Defra has announced that the reference period for these payments will be the years 2020, 2021 and 2022 (a different reference period to the Lump Sum).  The average of these years will set the reference amount.  This amount will be simply multiplied by the annual deduction to get the payment for the years 2024, 2025, 2026 and 2027.   It can therefore be seen that, if a farmer made a claim in 2020 and 2021, but has subsequently given up (most of) the land, they will still get two-thirds of the payment relating to that land in the four years from 2024.  De-linked payments will be treated as revenue for taxation purposes.  Whether delinked payments can be inherited or transferred is not yet known.

With the delinking of payments, entitlements will have no further use – the 2023 year will be the last time they are used.  If entitlements have been purchased (or inherited) there may be a loss for Capital Gains Tax after 2023.

Also, the cross-compliance system will come to an end.  Defra promises an update shortly on the future regulation of the agricultural sector.

Base Rates

The Bank of England increased UK base rates on Thursday 3rd February from 0.25% to 0.50%.  This is in response to rising inflation.  Further increases are expected.

SFI Pilot Payment Rates

The payment rates for the SFI Pilot have been revised.  Some of the payments have remained the same whilst others have seen an increase.  The table below shows the updated rates alongside the previous payment for comparison.  Some Pilot agreements will have already started, others are still being agreed but the new payments will apply from the start of all agreements.

Where agreements have commenced, an updated agreement can be obtained by signing in to Rural Payments service to ‘Generate’ and ‘Download’ and updated version.

Landscape Recovery

The application window for the first round of Landscape Recovery pilot projects is now open and will close on 24th May 2022.  Landscape Recovery is the third component of ELM.  It is for farmers and land managers, including groups, who want to take a more radical and large-scale (500-5,000 Ha) approach to producing environment and climate goods on their land, such as establishing new nature reserves, restoring floodplains to help reduce the risks from flooding, or creating woodland and wetlands.  The first round will focus on;

  • Species Recovery – Recovering and restoring England’s threatened native species e.g. recovering priority habitats, improving habitat quality and increasing species abundance.  Projects under this theme will be administered by Natural England
  • River Restoration – Restoring England’s streams and rivers, improving water quality, biodiversity and adapting to climate change e.g. restoring rivers to a more natural state, improving resilience to climate change, this could be by reducing flood risk.  Projects under this theme will be administered by the Environment Agency

The application process is competitive.  All ‘bids’ will be scored against assessment criteria.  Defra and expert advisers will evaluate the applications and aim to get back to all applicants with a decision by 8th July 2022.  The selected projects will initially be awarded project development funding.  Up to 15 projects will be taken forward within the total project development budget available of £7.5m.  Over the course of the project development phase, which will last up to two years, there will be the opportunity to negotiate public and private funding for implementation.  If a project meets Defra’s requirements at the end of the development phase, it will be awarded long-term funding.  Implementation agreements are expected to be long term, 20 years plus.

Application is via Defra’s eSourcing Portal, for further information and guidance on applying go to: https://www.gov.uk/guidance/apply-for-landscape-recovery-funding-to-protect-native-species-and-improve-rivers?utm_medium=email&utm_campaign=govuk-notifications-topic&utm_source=6b4aa2ed-04c7-4476-b410-2b245a7fc0f8&utm_content=daily

NVZ Grassland Derogations

Grassland derogations for livestock manure in Nitrate Vulnerable Zones (NVZs) will be offered again in England in 2022.  The derogation allows up to 250kg of nitrogen per hectare, if the nitrogen comes from grazing livestock manure.  The limit is usually 170kg per Ha.  The derogation is only available to those whose holding is at least 80% grass.  The application window is pretty short and will run from 1st February to 28th February.  A new derogation needs to be applied for each year by telephoning the Environment Agency  on 03708 506 506 (Monday to Friday, 8am to 6pm) with details of the amount of manure nitrogen produced by grazing and non-grazing livestock on the holding in the calendar year.  For more information visit the Defra website at https://www.gov.uk/guidance/grassland-derogations-for-livestock-manure-in-nitrate-vulnerable-zones .