Farming News - “Agricultural Transition Plan - biggest shake up in agricultural policy for decades” says leading accountant
“Agricultural Transition Plan - biggest shake up in agricultural policy for decades” says leading accountant
The Head of Agriculture at Smith Cooper, Bruce Montgomery, (pictured) has said that 2021 will be a big year for agricultural and farming policy following the introduction of The Agriculture Act 2020 which sets the framework around which the Government intends to build its future policy for agriculture following our exit from the European Union on 31st December 2020.
Bruce Montgomery comments: “The Government’s Agricultural Transition Plan is the biggest shake up in agricultural policy for decades, intended to pave the way towards more sustainable farming and land management. Although many of the schemes are still in pilot or consultation stage, changes have already begun.
“A key change within the plan is the phasing out of the Basic Payment Scheme (BPS), with reductions being made to payments from 2021.”
“BPS will be replaced with delinked payments in 2024. With delinked payments, farmers and land-owners will not have to farm the land to receive payments, until they have been phased out. Eligibility for delinked payments will be based on a reference period which will be decided after consultations in 2021. An exit scheme will also be introduced from 2022, allowing farmers to take a lump sum payment in place of any further BPS and delinked payments. It is fair to say there has been significant interest in the new lump sum exit proposals, particularly amongst those who are nearing the end of their farming careers. These succession issues, together with Inheritance and Capital Gains Tax, will require great consideration and planning to maximise the returns for both the exiting farmer and the continuing farming enterprise.”
“Other new schemes include the Environmental and Land Management Scheme, animal health and welfare schemes, and farm resilience and productivity schemes, intended to tackle urgent challenges such as climate change and establish more sustainable practices as part of a commitment to the future of farming.”
“In addition to the positive environmental impact, there will be new grants available, intended to support investment within the sector, helping farms and agricultural enterprises improve their profitability. By championing skills and innovation within the sector, the Agricultural Transition Plan seeks to improve the environment, helping the sector run more productively and innovatively, without detriment.”
“Going forward, farmers and land-owners will have to assess how they currently farm or manage their estates, adapting practices to meet the sustainable farming incentives being introduced. Many such businesses are already working hard to make improvements in this area. Cashflow will be undoubtably be affected with the initial reduction of the BPS and measures will need to be considered on how to replace this, as currently for some farming families this is seen as a lifeline. All agricultural businesses should be working with their advisors in looking evermore closely at their cost base to lessen the blow and drive efficiencies for the future”.
With a variety of information likely to be required as part of the application process for grant funding, Bruce adds that it is more important than ever that up-to-date accounting records are maintained.
Bruce adds: “Additionally, the receipt of new subsidies may have taxation consequences depending on the type of grant received and whether classed as capital or revenue. Its therefore important to seek timely and reliable advice from experts who can help you navigate the changes and ensure you’re in the best position commercially throughout the transition.”
It is important to note that many of the schemes are still in pilot or consultation stage, and further details on the application process for these schemes are yet to be released.