Defra Exit Scheme now open for applications

The scheme offers a lump-sum payment based on remaining BPS claims for those wishing to leave the farming sector in the next two years. It is however a limited time offer with applications closing on 30^th September 2022.

Defra will pay the lump sum based on recent BPS claims on land in England, on the premise that applicants give up their entitlement and stop farming by either selling, gifting or letting the land, or for tenants surrendering or assigning the tenancy.

Guidance about how to apply for the lump sum payment is available on the Government website

According to the guidance, to be eligible for the scheme, your farming business must either have:

• claimed, and been eligible, for BPS payments in the 2018 scheme year or in an earlier scheme year
• inherited agricultural land in England, or succeeded to an Agricultural Holdings Act 1986 tenancy, after 15 May 2018

Before you receive the lump sum payment, you must do all the following:

• transfer your agricultural land in England (but you can keep up to 5 hectares) or plant it with trees under a woodland creation scheme
• transfer grazing and pannage rights you have on common land in England, where required
• give up (surrender) your English BPS entitlements

Lump sum payments for eligible claims will be made from November 2022 for those that have already exited by this time.

Broadly speaking, the lump sum payment is very similar to the value of the remaining BPS payments that would have been paid as they are phased out between now and 2027.

The payment is based on a BPS reference amount set as the average of the BPS claims made in 2019, 2020 and 2021. This figure is then multiplied by 2.35 to calculate the payment due.

The maximum lump sum payment through the scheme will be capped at £99,875. Using the above calculations, this means that the scheme will be of particular interest to anyone with a BPS reference figure of less than £42,500. Any lump sum exit payment received will be classed as a capital payment for capital payment for tax purposes which will be a welcome relief too.

Overall, the lump sum exit scheme provides a great opportunity for anyone considering leaving the industry in the next couple of years and may just be the catalyst to help make that change.

If you require help or would like to speak to a specialist agriculture accountancy professional, then please do get in touch with us.

You can find further guidance on this topic here.