Opinion: Lump-sum exit scheme complexity will limit farmer uptake

I’m sure Defra meant well when it came up with the idea of paying older farmers in England – who apparently can’t or won’t adapt to greener farming methods – a bung of up to £100,000 to hang up their coveralls once and for all.

But it has created a complex proposal, the implementation of which is likely to benefit tax consultants, land agents and lawyers more than it will ageing farmers who don’t understand that cow burps and ploughing are now serious threats to human existence.

About the author

Stephen Carr

Farmers Weekly Opinion writer

Stephen Carr runs an 800ha beef, sheep and arable farm on the South Downs near Eastbourne in Sussex in partnership with his wife and four of his daughters. He also runs a nearby pub with his nephew, The Sussex Ox, which serves the farm’s beef, lamb, (and fruit and vegetables from the farmhouse kitchen-garden in season) through its restaurant.

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The lump-sum retirement payment, of course, is just an advanced payment of future Basic Payment Scheme (BPS) receipts to those who wish to leave the industry in 2022.

See also: Will Defra’s exit scheme appeal to farmers?

Last year, the average BPS payment in England was £21,500, so with the lump-sum payment set at 2.35 times historic receipts, if the “average” farmer were to retire, it would produce a lump sum of just over £50,000.

Why not wait?

This sounds okay, but farmers would only have to wait a couple of years to receive most of this money anyway. After that, BPS payments are due to be “delinked” from farming and food production.

So, if you’re thinking of retiring, why not wait until 2024 and walk off with the delinked payment then and leave all your future options open?

To receive the lump-sum exit payment, farmers will have to sell or let their farms if they are owner-occupiers, or relinquish their tenancies if they are tenants.

Having retired, they cannot claim any further farming subsidies, not even any future agri-environmental payments.

The Defra consultation on the proposed lump-sum payment – which remains open until 11 August – also raises all sorts of technical questions about how the money will be treated for tax purposes.

There is no HMRC guidance available yet, so we don’t how it will impact Agricultural Holdings Act tenancy succession, common grazing rights or be dealt with within farming partnerships or limited companies.

Not enough time

These are problems enough, but perhaps the biggest issue is a practical one: how are farmers interested in taking up the scheme expected to get their ducks in a row in time?

The government has been floating the idea of a lump-sum retirement scheme for years, but here we are, with Defra not expected even to firm up its proposal until October, with a scheme that might only be available for applicants in the first half of 2022.

That means tenants will miss the Michaelmas tenancy deadline if they wish to give adequate notice to their landlords. Even owner-occupiers need more time than that to make an orderly retirement from farming by next year.

Just as ridiculously, as NFU vice-president Tom Bradshaw has pointed out, there is not even a young farmer scheme being brought forward in tandem with this lump-sum exit proposal.

There has been a lot of initial interest in this plan. A recent NFU webinar on the proposed lump-sum and delinked subsidy schemes attracted 1,250 attendees – a record for such an NFU meeting. 

But a combination of sweeping restrictions on what retired farmers can and cannot do in the future, a lack of guidance on the tax implications of the scheme and a chronic shortage of time to get ready is likely to restrict takers to a mere trickle.