Services tailored to you...
With over five decades’ experience serving a diverse range of clients in the South West, we possess an unbeatable depth of knowledge across a wide range of industry sectors.
Our specialist partners and teams can provide expert advice on everything from farming and agriculture, to military tax allowances. We’re here to help you make the most of your planning opportunities so that you can grow with confidence.
Responses on DEFRA’s consultation on the phasing out of the Basic Payment Scheme should be received soon.
Government have proposed that a lump sum to be offered to retiring farmers in 2022 in substitution for all later annual direct payments. Ongoing farmers will face progressive reductions in BPS until it is phased out entirely in 2027.
We have estimated the BPS receivable between 2020 and 2027 at different levels of farm size:
Ongoing farmers
2020 Claim | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | Total | Discounted at 5%pa |
£10k | £9.5k | £8k | £6.5k | £5k | £3.75k | £2.5k | £1.25k | £46.5k | £41,503 |
£30k | £28.5k | £24k | £19.5k | £15k | £11.25k | £7.5k | £3.75k | £139.5k | £124,508 |
£50k | £46.5k | £39k | £31.5k | £24k | £18k | £12k | £6k | £227k | £202,867 |
£100k | £86.5k | £71k | £56.5k | £41k | £31.125k | £20.75k | £10.375k | £418.25k | £375,530 |
£150k | £126.5k | £104k | £81.5k | £59k | £44.25k | £29.5k | £14.75k | £609.5k | £548,192 |
Note: Reductions to 2024 are from DEFRA’s consultation document. Later years’ reductions are assumed
Retirement Scheme
2020 Claim | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | Total | Discounted at 5%pa |
£10k | £9.5k | £23.5k | £ – | £ – | £ – | £ – | £ – | £43k | £40,234 |
£30k | £28.5k | £70.5k | £ – | £ – | £ – | £ – | £ – | £129k | £120,701 |
£50k | £46.5k | £100k | £ – | £ – | £ – | £ – | £ – | £196.5k | £184,425 |
£100k | £86.5k | £100k | £ – | £ – | £ – | £ – | £ – | £286.5k | £272,425 |
£150k | £126.5k | £100k | £ – | £ – | £ – | £ – | £ – | £376.5k | £360,425 |
For farmers who previously claimed up to £42,500pa, these projections show no real difference in the value of the lump sum retirement payment compared with expected ongoing BPS to 2027. Larger farmers are penalised by a £100,000 cap. Government have not yet made it clear how the retirement payment will be taxed, although it is hoped that it might be subject to capital gains tax rather than income tax.
We anticipate that the decisions to adopt the proposed lump sum will be driven more by a motivation to retire from farming (if farmers ever do that!), rather than any inherent attractiveness in the scheme. Claimants will be required to dispose of their land or rent it out for at least 5 years, and where the business has been run by a partnership or a company, no partnership members or company directors will be able to claim direct payments subsequently.
Retirement decisions have much wider financial and tax consequences. Please speak to us if you are considering the retirement scheme. And if you are not, please consider how you plan to replace the income currently received from the Basic Payment. One ELM scheme, the Sustainable Farming Incentive, has already moved into pilot phase, and two others (Local Nature Recovery and Landscape Recovery) are due to begin pilots in 2022.
These schemes will be developing and we recommend that you keep abreast of DEFRA’s guidance (available from https://bit.ly/3osWYHz)