As part of its Agricultural Transition Plan, Defra consulted on two proposed changes to how direct payments, which are currently paid as BPS (Basic Payment Scheme) would be delivered in the future.
- In 2022, it would offer farmers who wish to exit the industry a lump sum payment in place of any further direct payments.
- In 2024, it would 'delink' direct payments from the land for all farmers. This means farmers would no longer need to farm the land to receive the payments.
These changes are separate to the progressive reduction of direct payments over the seven-year Agricultural Transition period 2021-27.
- Read more about progressive reduction of direct payments: Q&A guide to plans to reduce direct payments
- Read more about the Lump Sum Exit Scheme on our web page: Find out more about the Lump Sum Exit Scheme
Latest NFU work
We continue to raise a number of points with the RPA and Defra on how delinked payments will be delivered from 2024 onwards.
The main themes are around the lack of information around business changes and confidence about the information that was published and how farmers could be reassured by it.
Also that there is a lack of general awareness of the transition from BPS to delinked payments within the farming community.
We want to see as few farmers as possible impacted by the disruptive reducing profile in direct payments between 2023-2028.
We want Defra to commit to giving farmers the greatest opportunity to cope with business change during BPS/Delinked payment transition and not disadvantage them. We are seeking further information on this.
The consultation – a quick reminder
A 12-week consultation opened 18 May 2021 seeking industry views on the lump sum exit scheme and delinked payments.
The consultation included a series of questions about the proposed lump sum exit scheme including eligibility criteria and aspects of how Defra should calculate the value of the lump sum.
In terms of delinked payments, it sought views on:
- the reference period to be used to determine eligibility for delinked payments
- how to calculate the value of payments.
We consulted widely with membership, engaging with some 2,500 members across various activities to help develop our consultation response.
The initial scheme information was published on 8 February 2022: Lump Sum Exit Scheme (www.gov.uk).
The RPA will manage both the Lump Sum Exit Scheme and the delinked payments.
Delinked payments – what we know
Timescale and requirements
- Defra still intends to introduce delinked payments in 2024 and the last payment will be made in 2027, when these payments which are direct payments will cease. This new method of payment is said to significantly simplify the administration for all concerned.
- Defra will replace the current BPS in its entirety (including the young farmer payment) for all farmers for the remaining years of the agricultural transition. Delinking will not be optional if you want to continue to receive direct payments.
- Once introduced in 2024, recipients will not be required to continue farming, have land or entitlements in order to receive payments in each of the remaining years of the agricultural transition. It will however be necessary for the farmer to have claimed and be eligible for BPS in 2023 to be able to receive delinked payments in 2024 to 2027.
Value
- Defra has confirmed that the value of the delinked payment will be calculated each year as follows: a delinked reference amount multiplied by the progressive reductions for that year to arrive at the delinked payment.
- This means the value of the delinked payment each year will be less than the reference amount. The delinked reference amount will be based on a reference period that is the average of the English BPS 2020, 2021 and 2022 claims (including young farmer or greening payments).
- This is a different reference period to the Lump Sum Exit Scheme.
- The basis of BPS 2020 to 2022 values will be adjusted and will ignore a range of deductions and penalties that could have been applied in that period to avoid double reductions occuring.
Business changes since 2020
- There may have been business changes since BPS 2020 (the start of the delinked payment reference period) which affect the delinked payment a farmer could receive. More details are expected on these issues.
- Defra does state that if a business has been given a new SBI, it will normally treat it as a new business which cannot benefit from the BPS claim history of a previous business. This means Defra will not take account of the previous business when calculating your reference amount.
- However, there are exceptions for business mergers, business splits and inheritance cases.
The NFU is most concerned about the impact of the approaches Defra and the RPA could make in respect to the treatment of such business changes.
New schemes
- Receiving a delinked payment will not disqualify the recipient from applying for payment under new schemes, including ELMs (Environmental Land Management schemes like the SFI (Sustainable Farming Incentive)).
Cross compliance
- Cross compliance will not apply to delinked payments. However there is a regulatory baseline for farming within domestic legislation, which safeguards environment and protects the health of animals, plants and people.
- Most of the standards in cross compliance will continue to apply to farm activities as they are already legal requirements.
- Defra will make sure farmers are aware of these legislative requirements as we approach 2024 and will be working to reform the way we regulate them.
Tax
- Defra has confirmed the tax position of the delinked payment as follows:
‘Where a business is in receipt of a delinked payment, these will continue to be taxed in line with ongoing BPS payments and be income in nature.’