Agricultural Policy Reforms – threat or opportunity?

According to Government, the Agricultural Policy reforms will aim to “support a vibrant and resilient agriculture sector, that enhances animal welfare and the environment, and helps enable us to meet our ambitious targets such as the protection of 30% of UK land by 2030 and Net Zero by 2050”.

These reforms will come into force from 1 January 2021. Government have announced a seven-year plan which will see the payment of subsidies to farmers, based on how much land they own, phased out. This will be replaced with a system which will pay farmers for ‘improving productivity and the environment’.

When considering improving productivity and the environment, many may think of this as money they can ill afford to spend considering they are about to lose some of their direct payments. However, this could potentially lead to some fantastic opportunities for farmers and landowners to review their current processes and look at ways to innovate, improve and refine their business. With ‘innovation’ however, comes the possibility of R&D claims and maybe even grant funding.

There are limits in state aid which will need to be taken into account but for any farmer or landowner considering ways to ‘improve their productivity and the environment’ now is the time to talk to an expert tax adviser to ensure any project you undertake maximise any potential tax credits that could be harnessed.

As anyone in the Agriculture sector will be aware, the current system of ‘direct payments’ under per acre under the EU’s common agricultural policy will start to be reduced next year. By 2024 farmers will have lost at least half of their payments and by 2028 the government aims to have ended them altogether.

The changes coming in 2021 include:

• the removal of greening rules
• the first reductions to BPS
• improvements to cross compliance
• more money available through schemes and grants (funded through the BPS reductions)
• improvements to existing schemes

Lump Sum Exit Payments

From 2022, farmers who want to leave the industry can apply for a lump sum exit payment covering subsidies they would have received up until 2027. This initiative is seen to be a way to free up land so that new entrants can come into the market.

With the new focus the government is putting on funding, there may well some movement in the sector so anyone considering either exiting or entering this arena, should talk to one of our agriculture business experts. With 85 years of experience supporting farmers and landowners throughout the Lincolnshire and East Riding of Yorkshire, we have a wealth of experience and expertise to share with you.

For details of the changes coming into force, read the government guidance here.

Read the Agriculture Act 2020 here.