Delinked payments: Advice on transfers, land sales and FBTs
© Frazer/Adobe Stock Delinked payments will replace Basic Payment Scheme income in England next year.
The RPA is gearing up to send out delinked payments information statements to eligible former BPS claimants.
These will show a reference amount which will form the basis for direct payment sums received from the RPA from 2024 until 2027. However, there will be no requirement to hold or farm land to receive these payments.
See also: How to reduce capital gains tax after loss of BPS entitlement value
It is understood that queries on the statements must be raised with the RPA by 29 February 2024.
Lawyer Julie Robinson of Roythornes says this relatively short window means it will be important to check the statements and raise queries as soon as possible.
“It seems that not everyone is up to speed with the effect of the government’s planned changes for these payments on land sales and purchases, new tenancies and farm reorganisations,” says Julie, the firm’s agriculture partner.
Transfers
There will be a transfer period starting early in 2024 to enable transfers of reference amounts by those who want to transfer all or some of their reference amount to another business, or to have all or some of the reference amount of a closed Single Business Identifier (SBI) transferred to them.
“If you didn’t claim for BPS in 2023 there’s no point buying in anyone else’s reference amount as you won’t be eligible to receive delinked payments,” says Julie.
SBIs are critical to receipt of reference amounts, which will be allocated to and transferred from SBIs.
The right to receive a delinked payment depends on an SBI’s BPS claims during the 2020-22 reference period (entitling it to a reference amount) and that SBI having made a BPS claim in 2023.
The only exception to the 2023 claim requirement is for inherited land (see “Exceptions”).
A transferring business will need to have an SBI number and a reference amount; and the receiving business will need to have an SBI and to have made a BPS claim in 2023.
What are we still waiting for on delinked payments?
- Confirmation of dates for the transfer period, which is expected to begin early in 2024
- Confirmation of whether transfers will be allowed beyond 2024 (so far, Defra has said only that transfers for inherited land can continue until the end of 2027)
- Details of what the further reductions in payment values will be from 2025
- Regulations to be laid before parliament setting out details of how the transition from the old to the new regime will work. These must then be approved by parliament
- Information about how to transfer all or some of the reference amount to another farm business
- Information on how those inheriting land from a deceased BPS claimant can get the deceased’s reference amount transferred to them
Exceptions
Those who inherit land from a farmer who claimed BPS in any year of the reference period can ask the RPA to transfer that reference amount to them.
Where the farmer died after 15 May 2023, the receiving business does not need to have made a BPS claim in 2023.
“If you have rented, taken back in hand or bought land from someone whose SBI is now closed on the RPA system, and provided you made a BPS claim in 2023, you can ask the RPA to transfer some or all of their reference amount to you,” says Julie.
“Evidence of the relevant land transfer will be needed.”
Delinked payments – the nuts and bolts
- Delinked payments will be calculated based on the average of a claimant’s BPS payments in 2020, 2021 and 2022. This average is known as a reference amount
- Statements setting out claimants’ reference amounts are due to be sent out shortly and before the end of 2023
- Only those who made a BPS claim in 2023 will be eligible to receive delinked payments, even if they have a reference amount from 2020-22 claims
- The first instalment of delinked payments will be made from August 2024, the second from December 2024
- Delinked payments will be made twice-yearly after that, following the same pattern
- Progressive reductions will be applied to reference amounts from 2024 until 2027, the final year in which delinked payments will be made
- Transfers and sales of reference amounts will be possible
- The claims process is expected to be much simpler than for a “normal” BPS claim
Land sales
Where the reference amount is in the hands of someone selling land, the seller has a “live” SBI, and the buyer’s business made a claim in 2023 (whether it has a reference amount or not), it will be possible for the seller to transfer some or all of its reference amount to the incoming buyer early in 2024. Sales contracts should provide for this.
“If a seller of land made a BPS claim in 2023, the parties may prefer to keep the reference amount where it is and simply adjust the land price to reflect that,” Julie says.
“The seller will receive the delinked payments for the remaining years of the transition period (2024-27) whether he or she owns other land or not.”
Where a buyer is not eligible to receive a transfer of reference amount (for example, because it made no BPS claim in 2023), then the seller can retain the delinked payments or transfer them to someone else and it will be a matter of negotiation as to whether to factor the “lost” subsidy into the price, she advises.
Reference amounts great than £30,000 – land sales and tenancies
If a seller’s reference amount is more than £30,000 and only part of that amount is to be transferred, the RPA will need evidence of the land transfer from the seller to the buyer and this land transfer must have happened before 16 May 2023.
Similarly, where the land concerned is tenanted, the reference amount is more than £30,000 and only part of that reference amount is to be transferred, the RPA will need evidence of the land transfer from the transferring business to the receiving business, and the land transfer must have taken place before 16 May 2023.
New tenancies
Where an incoming tenant has an SBI and made a BPS claim in 2023, they will be able to receive a transfer of reference amount and receive delinked payments for the remaining years of the transition period.
“If the FBT is a short-term let, parties may want to stipulate that the tenant will transfer the reference amount to the landlord or the next incoming tenant at the end of their tenancy,” says Julie.
“However, it must be borne in mind that we do not yet have confirmation that transfers will be possible throughout the remaining transition period through to 2027 and that progressive reductions will mean the payments will be very low by then.
“The real question on the grant of a new tenancy is, who holds the reference amount derived from occupation of the holding during the reference period?
“If the landlord holds it, they may be happy to transfer it, adjusting the rent accordingly. If it is held by a previous tenant, whether they have an obligation to transfer the reference amount will depend on the terms of their tenancy.
“Quite a few BPS/entitlement clauses we have seen in agreements do not cover that scenario.
“If the outgoing tenant did not make a BPS claim in 2023, they might be open to agreeing a transfer of the reference amount, as they will not be eligible to benefit from the associated delinked payments.”
Business restructures
Farming business structure changes sometimes involve a new business being set up alongside the continuing original business.
Where a new business made no BPS claim in 2023, transfers of any reference amount from the old business to the new one will not be possible.
In such cases, Julie suggests that the parties may agree to factor the income stream from future delinked payments into the overall deal, with the old business continuing to receive the delinked payments.
New entrants
New entrants starting farming after 15 May 2023 will not be entitled to receive a transfer of reference amount and delinked payments unless they inherited land.
This will leave new entrants without the direct payment support that most existing farm businesses will have, unless some provision for them is made by Defra.
Calculate delinked payment values
Once delinked payments information statements are received, Defra’s progressive BPS reductions calculator can be used to arrive at a farm’s delinked payment value for 2024.
To do this, multiply the delinked reference amount by the progressive reduction for the year in question.
This is currently available only for the 2024 calculation. Defra has yet to announce progressive reductions for 2025-27.