Changes to Agricultural Subsidies


Single payment entitlements arising from the Common Agricultural Policy (CAP) are changing. Those looking to buy farmland will need to complete these sales with the corresponding number of entitlements early in 2014 or risk losing their financial support.

Under the new basic payment scheme, it is estimated that about 12,000 claimants will no longer qualify for payments due to size. To make a claim under the new basic payment scheme in 2015, the minimum area of land at the farmer’s disposal will increase from one hectare to five hectares. It is probable that this will result in many farmers wishing to sell entitlements that will no longer have any value in their hands.

Single payment entitlements will be replaced by the newly created Basic Payment Entitlement. The 2015 Basic Payment Entitlement will be based on each farmer’s return for 2014 and as such those looking to buy farmland will want to have the entitlements transferred to them by April 2014, being six weeks before the deadline for submitting the return on 15th May 2014. By contrast, farmers looking to sell farmland with entitlements may find the market a little restricted after April 2014. The uncertainty arising from farm sales later in the year suggests that such sales will take place in the early parts of 2014.

If those entitlements brought forward from the old scheme result in the number of new entitlements exceeding the number of eligible hectares held in 2015 then the excess entitlements will be cancelled.

The new greening requirement, which outlines compulsory agricultural practices that are beneficial to the environment, will apply from the start of 2015. Therefore plantings in the autumn of 2014 will need to reflect the greening requirement. There will be a penalty for failure to undertake greening. It is not possible to opt out of greening on the basis that part of the direct payment is voluntarily foregone. This will bear most heavily on arable farms and it is unclear what happens to the requirement if the farm is sold during a scheme year. It is possible that the requirement will continue to apply in the hands of the buyer.

Those thinking to amass the new entitlements because there may be a glut of them should be aware of the new rules concerning “degressivity”. The fraction of any payment to a single farm business which exceeds €150,000 will be reduced by, it seems, 5%. This is the implication of the statement made by the Secretary of State on 19 December 2013 when he referred to “the minimum reduction on basic payments over €150,000”.

The CAP is currently being reformed and changes are expected at the start of 2015. Under the CAP farmers in the EU currently receive financial support. We now have the final version of the Council Regulations but still await the Commission Regulations and, thereafter, the Regulations for England and Wales. The picture is becoming clearer but we do not yet have the final detail. Everything herein is subject to this point.

The points made in this briefing are general observations and inferences from the material currently available. They should not be relied on further than this. DAVITT JONES BOULD are available to advise in any particular case, as needed.

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