As the Government launches a new consultation around plans to offer a lump sum to farmers who wish to retire or leave the industry, Head of Agribusiness David Kinnersley speaks about the proposed new scheme.
As part of the new agricultural policy in England, from 2022 the Government plans to offer farmers who wish to exit the industry the option of taking a lump sum payment in place of any further Direct Payments. From 2024 the Government also proposes to ‘delink’ Direct Payments from the land for all farmers, meaning that recipients will no longer have to farm the land to receive the final scheme payments finishing in 2027. The aim of the plans is to enable older generations of farmers to retire, while freeing up land for younger farmers who might otherwise struggle to get into the industry.
We’re of course yet to see what the take-up will be like, but the plans will undoubtedly leave farmers looking at their own circumstances versus the cash released from the scheme. There are still a number of questions to be answered, not least what the term ‘retirement’ will mean, the likely level of the lump sum as well and if this will be subject to income tax.
A consultation has now begun and one of the things it covers is eligibility, suggesting that a tenant should have to prove that they have given up their tenancy, while a farmer should have to sell their farm, gift it to a relative or let it out for a period of at least 10 years. Each farmer’s situation will be different but if for instance a tenant of an average-sized farm was to receive a lump sum of £50,000 and this was taxed, they would be left with a relatively small sum to secure a new property or provide them with a pension.
With many older farmers already contracting out the manual farm work will the scheme make a material difference, despite the older age of many farmers, and release land for others to farm?
Farming in-hand is still tax efficient and farmers who opt to lease their land out for 10 years could then face different taxation issues, so there are a number of complexities surrounding the plans. Although it will be attractive to some, for instance farmers with ill-health may see it as a good way to retire and move into a care facility, the Government will need to use the results of the consultation to ensure it is attractive enough to make the impact they desire.
It is very true that young people struggle to get into the industry as not only is it difficult to find available land to rent, but farming also requires a lot of start-up capital. It’s positive that the Government is looking to address the age structure in the industry, but only time will tell if it’s enough to impact retirement levels.
I’d advise anyone in the industry to take part in the consultation as this is your opportunity to help shape the scheme, who is eligible and how it will be delivered. Anyone thinking about taking up the Government offer should also take an in-depth look at their own personal circumstances with their advisers to ensure it is right for them.