In recent months, the NFU has been made aware of more and more members seeking to change their business structures. This can include looking at who is formally involved in the control and management of the business, as well as who holds ownership of the land and other assets. In many cases, this has been due to the proposed changes to inheritance tax, but there may be other reasons why families have wanted to make changes.
A change in business structure or control of a business, as well as land occupation changes, can have an impact on a range of scheme agreements.
It is therefore important this issue is considered when thinking about any changes to a business that has support scheme agreements in place. For example, currently, SFI does not generally recognise or anticipate that significant business changes could happen during the three-year agreement period and does not allow the transfer of the agreement as a result.
The RPA needs to understand business structure changes and, in some situations, that can lead to the RPA changing the business’s SBI (Single Business Identifier). This change can risk the receipt of future support scheme payments and possibly lead to the clawback of scheme monies already received.
Equally, where a business is giving up occupation and/or control of land, this can have an impact on payments already received, particularly where this occurs mid-way through a multi-year agreement.
Where a business change is being considered, taking professional advice that covers both legal and accounting support as well as seeking input from those who understand support schemes is going to be key to navigate all the issues. It is important that any professionals advising on potential business structure changes are alerted to the fact that you are participating in support schemes, so that this can be property accounted for in the advice. NFU members can obtain free initial legal and professional advice from NFU CallFirst, and the Legal and Technical Advisers at NFU CallFirst can also arrange a referral to one of the NFU’s panel firms of solicitors for more detailed advice about their specific situation. NFU members can also make use of the NFU’s Legal Health Check service, to help identify areas which may need to be addressed.
How the RPA treats business structures
The RPA needs to understand who the scheme agreements holders are for a range of schemes it administers, such as ELMs or productivity grants. This is so it can identify the business, and understand how one business may be linked to any other businesses, and check this against the scheme rules in place (for example, claim limitations that are set per business).
The RPA also needs to know who controls a business, their relationship to other businesses if they have an interest or interaction with those other businesses, and when control within a business changes. Due to the rules in place it can lead to separate, legally recognised businesses being considered as one business for the purposes of engaging with support schemes due to the level of common control between the respective businesses.
The RPA identifies separate businesses via their unique SBI (Single Business Identifier). The continued use of an SBI number or a change to an SBI number for a business is key when it comes to how the RPA treats any associated support schemes in place for the original business.
The rules the RPA follows to determine the identity and extent of a business and where there are changes within those businesses can be found at: GOV.UK | Rural payments: if the structure of your business is changing. This guidance may be of assistance in understanding what view the RPA may take of any restructuring, but as every situation is unique, it should only be used as a general guide.
These are important rules to consider when changes to business structures or control of these businesses occur. So, when seeking advice about potential business structure changes, it will be important to alert professional advisers to any other business interests of the parties involved, so that they can advise as to whether there are likely to be any significant implications.
What is a business change?
Business changes can take a number of forms and can be triggered by a number of events. This can include changes to the partners in a partnership, partnerships divided into new business structures, new family members coming into a farming partnership with original partners retiring from the partnership at the same time.
These changes may not be considered significant by a farming family, however, as set out in the guidance, you would need to notify the RPA of these changes. The RPA will consider how any changes impact on its records.
Depending on the precise circumstances, the RPA may decide the changes are minor and no further action is needed, or it may conclude that the changes are more significant and trigger a new business record and therefore a new SBI number is needed. The guidance sets out the factors that the RPA takes into consideration when making these decisions.
If the RPA determines a new business has been created due to changes made to its structure, this may impact on your ability to continue with any existing environment schemes. For example, some schemes do not allow you to transfer agreements across from old businesses to new businesses. What happens next will depend on the rules for each scheme.
We have highlighted the information currently available on how business changes and agreement transfers are treated within different support schemes; however, it is always important to check that you are referring to the latest version of any guidance documents.
This is not exhaustive list, it does not cover woodland schemes for example, and each agreement will need to be considered alongside any others to determine how one set of rules will impact upon another.
Countryside Stewardship revenue agreements
Information covered in section 7 of the relevant agreement handbook covers business changes and flexibilities.
Standalone capital grant agreements
Information on these schemes can be found at: GOV.UK | Capital items: guidance for applicants and agreement holders.
Environmental Stewardship agreements
Information is covered in section 3 of the scheme handbook on flexibilities around transferring agreements.
SFI
Currently, SFI does not recognise or anticipate that any significant business changes could happen during the three-year agreement period.
The NFU has raised a number of issues with the RPA including:
- Inheritance upon death – we understand that the RPA is now in the process of allowing transfer in limited situations.
- Business change – the RPA has confirmed to the NFU that the aforementioned rules on business change apply to SFI.
- Transfer all or part of the SFI agreement – unfortunately, as is set out in the SFI guidance, there is currently no option to transfer all or part of the agreement to another party, for example when giving up a tenancy or a piece of land or selling the farm or land. This is different to Countryside Stewardship revenue agreement transfers.
SFI guidance is available at: GOV.UK | Sustainable Farming Incentive: guidance for applicants and agreement holders.
Productivity grants
Many schemes have a five-year period where scheme conditions need to be respected. See: GOV.UK | Invest in equipment, technology and infrastructure to increase productivity for more information.
