In England one of the most important elements of the new scheme is that farmers don’t have to establish new entitlements like they did in 2005.
Those entitlements are being rolled over and on January 1, 2015, Single Payment Scheme (SPS) entitlements will become Basic Payment Scheme (BPS) entitlements.
However some of the eligibility criteria of who is able to claim are being changed and this may lead to people currently claiming under the SPS not being able to claim under the new BPS in 2015.
It’s also important to understand that if you can’t claim on your entitlements, and you choose to sell them, the timing of doing that. In 2015 entitlements that aren’t claimed on will be lost.
What’s the difference between a farmer and an active farmer?
Sounds like the start of a joke, but the punch line is lacking in any humour.
In order to claim BPS or be transferred BPS entitlements, a claimant must be an “Active Farmer.” Firstly though, to be an active farmer, you must be a “Farmer”.
A farmer exercises agricultural activity – ie, rearing, producing, growing – what we would understand as what farmers do.
Farmers could also maintain an agricultural area so it is suitable for grazing or cultivation, but it could also mean carrying out a minimum activity on agricultural areas naturally kept in a state suitable for grazing or cultivation.
There is more detail still awaited on the definition of active farmer and in particular the element surrounding “naturally kept” land and “minimum activity”.
Draft rules from Europe would not allow a minimum activity to be linked to production or stocking rates, so it will be interesting to see what gets set.
To be an active farmer, you must also not fail one of the two active farmer tests. The tests include the minimum activity (which is yet to be set by government) and a negative list.
The negative list excludes anyone who operates airports, railway services, waterworks, real estate services, permanent sport and recreational grounds. What needs clarification is the definitions of that short list. What does real estate services actually mean? Will a small local football pitch on a 3,000ha holding make the claimant ineligible?
It’s important to assess this negative list, as there is an appeal mechanism, and more claimants than first thought may fall into this negative list. Any appeals would want to be implemented as early as possible in order to claim in 2015.
Due to the definitions not yet being clear, it is wise to flag up any doubts early with your advisers if you might fail the active farmer tests now or in the future.
Is there a minimum claim size?
The minimum claim size is currently set at 1ha under SPS and this is being increased to 5ha under BPS.
If you now fall below this threshold, options may include selling your entitlements after you’ve claimed on them this year (May 15) and not claiming again, or renting your land out and transferring your entitlement to the tenant so they can claim instead. If you chose not to sell or transfer, your entitlements would go unclaimed in the first year of BPS and then be lost.
If I don’t claim my entitlements in 2015 will I lose them?
For 2015 scheme year only entitlements that aren’t claimed will be lost. Under the current scheme, if farmers have more entitlements than land, they have been able to rotate them under a two-year rule, so as not to lose them.
This rule will still be in place under BPS, but not in 2015. Entitlements not claimed in that first year will be lost. Claimants who have land subject to pipelines or temporary works over 2015 would need to make an application under force majeure not to lose them.
When should I sell or transfer my entitlements?
The RPA have released guidance on when transfers can take place. If you have entitlements that you need to sell after this year’s claim (May 15) the window for transfers using existing documentation (RLE1 forms) would be from April 3 to October 19.
There will be no transfers of entitlements from October 20 this year to mid-January 2015. After this point, any entitlement transferred would be BPS entitlements and the transferee (recipient) would need to be an active farmer.
If you are needing to sell your entitlements as you cannot, or do not want to, claim after May 15, it would be advisable to sell them as soon as possible after April 3, enabling you to claim one last time. There is likely to be plenty of transactional activity and the more time the better.
If you need to transfer entitlements for business restructuring purposes or other complex reasons, advice should be sought, so as not to miss the transfer window, and also ensure you are eligible.
Next time: The Young Farmer Scheme and understanding the impact of degressivity.