Frustration over delays to lump sum BPS retirement scheme

Earlier this year, DEFRA announced it was planning to introduce a lump sum retirement scheme for farmers in England, which was due to open for applications next spring.

The scheme applies to farmers who have claimed under the Basic Payment Scheme (BPS) since 2015 or before, with the rule relaxed for those who had inherited land or succeeded to a tenancy since 2015. Those applying would be able to receive a lump sum in place of any further BPS or other direct payments from 2022.

The timetable for the scheme was as follows:

• Details of the scheme were issued in May 2021, including a consultation document asking for comments on some of the technical points.
• Closing date for feedback on the consultation document was 11 August, 2021.
• DEFRA was to then publish the detailed scheme rules by “Autumn 2021”.
• Applications to the scheme were due to open in Spring 2022.
• Claimants were then to be given a period of time to cease their businesses by selling land, surrendering tenancies, or renting out their farms to receive the lump sum.

Whilst there was a lot of detail in the documents issued in May 2021, there were also some major gaps:

• How the proceeds from the scheme were to be taxed. Whether they were subject to Income tax or Capital Gains Tax would make a big difference to the post-tax figure.
• How the scheme would work in family situations where only some of the family wished to retire from farming.

Our view at the time was that the amounts being offered - 2.35 times the historic amount of BPS receipts - while welcome, was unlikely to be enough to make many farmers apply for the lump sum. Farmers who had already made the decision to retire were the most likely applicants.

We are now past the end of Autumn, and no further details have been announced. Strutt and Parker, a national firm of land agents, has reported that the Government response has been delayed but that it was still intending to open the scheme in 2022.

This is an unsatisfactory state of affairs, as the cessation of a farming business is something that needs careful planning many months in advance. Sales of farms and dispersal sales of livestock are usually undertaken over the Summer months. All of this leaves little time to make decisions if the scheme rules are not published until early 2022.