From 1 January 2014 there will be a new Scheme for entitlement and payment of SFP. How will the draft proposals affect farmers now receiving payments? What has to be done to keep or acquire eligibility?
Help! I am Buying / Selling / Dealing in Farmland. Yes, We Can Help
We are preparing clauses to cover the transitional problems which we anticipate are likely to arise from the changes. We will advise on the implications for people buying and selling farm and estates; leasing and surrendering land with current entitlement eligibility; planning partnership and business ownership and structural changes and dealing with the estates of deceased claimants and transmission of land by their personal representatives. This is an ongoing monitoring and learning process.
Are You Eligible? In 2011 and 2014?
2011 Status
The claimant must have 'activated at least one entitlement under the Single Payment Scheme' in 2011. There are certain exemptions to this eg farmers who did not activate any entitlements under the Single Payment Scheme, but produced exclusively fruits, vegetables and/ or cultivated vineyards.
2014 Status
The claimant must be an 'active farmer' and have the land at his disposal on the relevant date. A claimant who does not achieve 2011 status has two possible options. If he is a 'young farmer', he may be able to claim entitlements from the national reserve. Or he can get eligibility from a farmer with 2011 status through contract.
The Golden Ticket?
A person with 2011 status may transfer that status if either the some or all of his entitlements are sold or leased under a contract signed before 15 May 2014.
Selling or Surrendering a Piece of Land?
2011 status may only be transferred to one person and if there is a part transfer, the Seller may not retain any part of his 2011 status.
Take care if land with entitlements is being sold in lots – each buyer may not get a 'golden ticket' and if any lots are unsold the seller may lose his golden ticket and be left with unsold land and no future entitlements.
Active Farmers Only Can Claim
The amount paid out in Farm Subsidies has to be politically justifiable to the EU population. To limit abuse, an income test is being added; so it is proposed that you will be excluded from Active Farmer status if the annual amount of Direct Payments is less than 5% of the total receipts you obtained from non-agricultural activities in the most recent fiscal year. The minimum farm size will be 1 ha (but the UK could opt for up to 5ha).
What is an agricultural activity?
Should the most recent year be fiscal, accounting, or calendar?
Greening
30% of the new direct payments will be attributable to greening measures 'beneficial to the climate and the environment'. These are compulsory, so no opt-out.
No monoculture Farmers with more than 3 ha arable land may have to grow 3 different crops with no one crop planted on less than 5% or more than 70% of the land
No grassland rip-up Farmers with permanent grassland (unchanged for < 5 years) may have to keep at least 95% of it intact.
7% EFA 7% of the eligible land may have to be in an Ecological Focus Area; eg fallow land landscape features and buffer strips. This would be in addition to permanent grassland. Eligible land is land on which there is agricultural activity. It is unknown if land currently in field margins and stewardship schemes will count towards the EFA.
Capping Proposals €
€150k – €200k reduced by 20%
€200k – €250k reduced by 40%
€250k – €300k reduced by 70%
There would be no payment over €300k.
The 30% of direct payments paid for the greening may not be capped nor will Pillar II payments. In calculating the capping levels, it is proposed that farmers will be able to deduct 'salaries effectively paid and declared by the farmer in the previous year. This should include the cost of staff wages and salaries but not charges for contractors' services. Company and other business structures may enable directors salaries and working partner's fixed or basic salaries, to be deductible.
Cross Compliance GAEC
Good Agricultural and Environmental Condition will still be necessary, but the number of measures is likely to be cut to 8 and Statutory Management Requirements to 13. Cross compliance requirements and thus breaches will affect all payments.
Young Farmers Scheme
If you are under 40 at the relevant time and are establishing or have in the last 5 years set up an agricultural holding, for up to a maximum of five years from when the business was established, an extra payment may be claimed. It is to be calculated by multiplying 25 per cent of the average value of entitlements held by the young farmer by the number of entitlements he has activated for payment.
A maximum limit is placed on the number of activated payment entitlements to which this can apply. In the UK this could be between 25 and 54 hectares. Is it worth not making your sons partners in the business now, but carving out a separate business for each one from within the existing family farm? The old 'test of separateness' seems likely to scotch such ideas.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.