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Could Agriculture Bill offer farmers a golden handshake to quit farming?

PUBLISHED: 11:40 15 February 2019 | UPDATED: 11:54 15 February 2019

A combine harvester at work at Thrigby. Picture: DENISE BRADLEY

A combine harvester at work at Thrigby. Picture: DENISE BRADLEY

Archant

Farmers could be eligible for a one-off windfall of £750 per hectare if they choose to take their subsidy payment as a lump sum for capital investment or retirement planning.

Rural agents said one of the proposals in the government’s draft Agriculture Bill is that direct payments will be de-linked from the requirement to farm the land as they are phased out after Brexit – with one option being to claim a one-off lump sum payment in place of the annual basic payment.

George Chichester, director in the farming department of Strutt and Parker, said: “This suggests that there will be options for farmers, depending on their individual circumstances, which go beyond deciding to continue to farm as usual and accepting a reducing annual basic payment through until 2027.

“Some might choose to take the capital sum and use it to fund improvements in their business. Others could decide to cease farming altogether and plough their money into their pension or use it to reduce debt.”

Mr Chichester said the government had not yet given any detail of how the payment will work or its likely value, but if the net present value of the future income stream was calculated then, in theory, the payments should be worth about £750 per hectare in 2021 – just over three times the value of the current annual payment.

But until more information is provided, he said farmers will be unable to decide whether taking the cash as a capital sum will be the right decision for them.

“At this stage we don’t know what the tax implications of taking the capital sum will be,” he said. “Is this sum going to be treated as capital, or is it going to be income, or indeed will it be taxed as a premium?

“Will there be a cap on the capital sum the government is prepared to pay out to individual businesses?

“On what date will the eligibility for this capital sum be set? Will it be based on historic claims or will it be based on a future date?

“What happens to farm sales spanning the period between the date when the eligibility is crystallised and the date on which the payment is made?

“What are the implications for landlords if the tenant takes the capital sum and retires? What is going to be the knock-on effect for the rental market in the short term?

“Ultimately, while the de-linking proposal should offer farmers greater flexibility, more information is needed to enable people to take informed decisions. Every farmer’s circumstances will be different so there can be no standard recommendation.”

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