Patrick Playfair: CAP is a little clearer

A further consultation document on the future grant schemes was also published in December. It remains the case that few details have been finalised on how these schemes will be implemented in Scotland. However, as things stand we can see who will now qualify.

Those businesses that made a claim in 2013 will qualify automatically.

However one of the main additional rules for claiming the Basic Payment will be an active farmer test. While all sorts of questions have not been addressed, the consultation states the Government’s preferred option for the minimum activity is a minimum stocking density of around 0.05LUs/ha. But there will be derogations for active farmers in, for example, biodiversity schemes which restrict stocking to a lower level.

There is not much information in the consultation regarding businesses that are not currently eligible although there is clarification that the preferred option for the National Reserve is that it is open to existing new entrants (including those who purchased some entitlements in the current scheme years) and future new entrants as well. Force majeure circumstances should also invoke an allocation from the National Reserve. No other categories for National Reserve were mentioned and neither was there any mention of transferring ‘golden tickets’ or exemptions that might be available to the 2013 qualification rule.

Contrary to the relatively simple changeover schedule previously anticipated, the consultation suggests that, while the Government is thinking about a gradual transfer from historic to flat rate, it has certainly not ruled out a flat rate from day one, and the way the historical element is calculated, if it is carried forward, is not going to be as straightforward as previously suggested.

The Government’s preference is to use the value of Entitlements held in 2014 on a regional basis, rather than those claimed this year. The historical part of the 2015 claim would then be calculated using the 2014 data converted as a percentage figure of the new total budget for whichever ‘region’ in which it is claimed. While the consultation asks for opinions on how quickly the changeover should occur, if a gradual changeover is what happens, it does not give any Government thinking on this. If ‘standard’ means ‘equal’ steps to the convergence, the 20% changeover per year does remain likely.

This latest paper states that the preferred option is to use historical land use to divide the country into the payment regions with the preferred categories being arable/temporary grass, permanent grass, and rough grazing. The suggestion is each land parcel would receive its classification and that would remain for the rest of the scheme period, whatever improvements may be undertaken on the ground.

Previously there had been a possibility that permanent grass might attract a higher flat rate payment than arable/improved grass; the Government’s preferred option however is that both classifications will receive the same payment rate (with a projected estimate in the consultation of €200-€250/ha., with rough grazing receiving a lower one (projected at €20-€25/ha.).

The 2015 claim remains important for establishing the number of new Entitlements you receive, i.e. the eligible area you claim will equate to the number you are allocated. The Government are proposing a ‘windfall tax’ (to transfer Basic Payment to the National Reserve) on entitlement values that significantly increase due to, for example, the end of a tenancy. This suggests ‘stacking’ history will be possible, although if the ‘tax’ is introduced and is high enough (i.e. 100%), it will amount to the same thing.

The Government are also proposing a siphon on sales without land so that up to 50% of the value is transferred to the National Reserve, mainly to encourage farmers giving up land to hand on entitlements to the new occupier, rather than hang on to them and either become ‘slipper’ farmers or sell separately on the open market.

Satisfying the ‘greening’ rules is required to gain the last 30% of everyone’s BPS, and the Government prefer this payment method to a flat rate across all areas, which is suggested as an alternative. However there are a number of complex measures and restrictions to be considered for greening relating to crop diversification, protection of permanent grass and ‘Ecological focus areas’ and it is probably best to seek advice on whether you qualify.

At this stage it is possible that these measures will be replaced with some sort of equivalent certification scheme which might also include SRDP commitments, for example.

One compulsory element of the new scheme is for a top-up for young farmers (under 40 on 31st December 2015) as well as new entrants for a maximum of five years, where a new entrant is someone who set up within the five years prior to 2015. The preferred option is for this to be calculated at 25% of the value of the Entitlements held. It looks as though it will be between 25 and 54 Entitlements only. However much of this is still unclear. For example no mention has been made of what sort of business the young farmer or new entrant will need to head. For example will a sole trader, Partnership, Limited Liability Partnership, Limited Company all be eligible? And does the business have to be a new business, or is a generation transfer in an existing business acceptable and so on.

And what of capping of payments? While not explicitly stated, it appears the Government’s preferred option is for a 5% reduction on payments over €150,000 (which is the minimum allowed by the EU agreements) with some further reduction or cap for higher values, such as 25% for payments over €300,000 and a maximum payment allowable of €500,000. Taking into account salaries paid out is barely mentioned so this is presumably not a strong consideration. As before, the ‘greening’ part of the payment is exempt from the calculation.

The 2015 Modulation rate has been announced at 9.5%, considerably lower than the current 14% and the suggestion is to keep the minimum claim area at 3 hectares.

As far as beef calves as concerned, the government’s preferred option is to increase Coupled payments by using the maximum 8% transfer of Pillar 1 money (increasing the total budget from the current €30 million to €42 million approximately). They also prefer to front-load these payments to the first ten calves and calves 11-50, and to extend it to calves that are 50%+ beef genetics. While asking about lamb support, the Government does not wish to go down this route.

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Patrick Playfair is a farming and rural land specialist at Edwin Thompson in Berwick. If you would like to discuss any of the above and the implications it may have for you, please contact Patrick Playfair at the Edwin Thompson Berwick Office on 01289 304432 or Hugh Jones or Michael Evans at Edwin Thompson in Galashiels on 01896 751300.