LUMP SUM EXIT SCHEME DETAILS FINALLY PUBLISHED
Published 11 February 2022
The much-delayed details of the Lump Sum Exit Scheme have finally been published – and applications open in just a few weeks.
The basics of the scheme are similar to what was consulted on last year, but there are some important new aspects, according to Tom Corfield of Arnolds Keys Irelands Agricultural – with the ability to retain up to five Hectares of agricultural land, or retain the entire farm if planted with trees under a Woodland Creation Scheme.
“The consultation on this scheme ended in August last year, and we were promised the details in October, and then by the end of 2021, so we have been waiting a long time for the details of how it will work,” said Mr Corfield.
“The core mechanism of the scheme is much as proposed before the consultation, but there are some important changes which may affect what retiring farmers do.”
The Lump Sum Exit Scheme was first proposed by DEFRA with the aim of encouraging older farmers to retire and pass on their land to a new generation of farmers who are finding access to land a problem. The scheme is designed to offer those who want to exit the sector the option of taking a lump sum payment in place of any further Direct Payments – provided they dispose of their agricultural land.
“The original proposal stipulated that retiring farmers would have to dispose of at least 95 per cent of their agricultural land to qualify, but this has now been changed so that they can retain up to five Hectares of agricultural land, no matter how big or small their farm,” said Mr Corfield.
“Retiring farmers will also be able to retain all of their land if they transfer it into the Woodland Creation Scheme – and will still be eligible to receive payments under the England Woodland Creation Offer.”
Those qualifying will receive a lump sum equivalent to 2.35 times their average BPS payment during the years 2019, 2020 and 2021, subject to a cap of £42,500 (meaning the maximum lump sum payment will be £99,875).
The document published this week also clarifies how the payments will be treated for tax purposes – with Lump Sum Exit Scheme payments treated as capital and therefore subject to capital gains tax.
“The tax situation is important, because most retiring farmers will already be disposing of their capital assets at the same time as they receive the Lump Sum payment,” said Mr Corfield. “We haven’t yet seen HMRC guidance on the details, but anyone considering this scheme needs to take the tax implications into account”.
“Overall, this is a useful scheme, but still limited in its scope. Every case will be different, and it will be vital to consider whether it’s better to take advantage of the Lump Sum Exit Scheme or whether a transfer for BPS entitlements to a successor might be a better option. Farmers should seek expert advice before making any irreversible decisions.”
Applications for the Lump Sum Payment Scheme open in April, and run until the end of September. Those interested can request a Forecast Statement immediately, which will give them an idea of how much they could receive under the scheme. Further details are available at https://www.gov.uk/government/publications/lump-sum-payments-for-farmers-who-leave-or-retire-from-farming-and-delinked-payments/lump-sum-exit-scheme-and-delinked-payments-how-the-payments-will-work.
Share this story
Find out more Contact Tom Corfield>
Arnolds Keys Blog
10 February 2022
A rare opportunity for investors to take advantage of the boom in demand for industrial units has come up with the announcement of the freehold sale of the Downham Grove... Read more >
7 February 2022
Forty new homes are set to be built on the site of an 18th century brewery and maltings in Norwich, after a £1.5 million land deal brokered by Arnolds Keys,... Read more >
4 February 2022
A key feature of a property market which is operating in an increasingly ageing population is the phenomenon of downsizing. Read more >
31 January 2022
It has been a really welcome boost to see a sustained period of settled weather at the start of the year, which has enabled a general catch-up to take place... Read more >