Farming News - BPS Lump Sum Exit Scheme Needs Creative Thinking to Have Impact

BPS Lump Sum Exit Scheme Needs Creative Thinking to Have Impact

29 Mar 2021
Frontdesk / Finance

The Tenant Farmers Association (TFA) is hoping that the Basic Payment Scheme (BPS) Lump Sum ExitSscheme can be a catalyst for change, but it will require all parties involved to be creative about its implementation and use.

A DEFRA consultation on the Lump Sum Exit Scheme is expected over the next few weeks. This will provide some useful information for individuals to consider thinking about whether the scheme is right for them.

TFA Chief Executive, George Dunn, said “We are not expecting the scheme to deliver enough in itself to provide a full retirement benefit. However, taken as part of a portfolio, it could be an extremely important catalyst to encourage people to retire. For tenant farmers that portfolio could include a payment from the landlord for a tenancy surrender, compensation for tenants’ improvements to holdings, sale of live and dead stock and other available pensions.

"Sadly, the TFA is already beginning to see evidence of landlords taking a less than helpful approach to discussions around tenancy surrender. Early reports from members suggest that in some cases where tenants are revisiting previous negotiations on a tenancy surrender that failed to arrive at an agreed value, agents for landlords are reducing offers in view of the potential availability of the exit scheme.

“This short-sighted, knee-jerk reaction is sadly typical of the way in which we see some landlords’ agents operating. In many cases, tenants looking to take part in the scheme will be on secure, long-term agreements at regulated rents. The landlord’s benefit from the scheme is getting back vacant possession of the farm which they can then either sell unencumbered by the tenancy or rent out on a new tenancy at a market rent. Landlords should not be seeking to take direct advantage from the exit scheme which is there to assist people into retirement. There are benefits here both the landlords and tenants and we must not waste this once for all opportunity when it comes”.

"Through scheme design, DEFRA too can do much to encourage important restructuring. This will include ensuring that the payment reflects the full value of the BPS entitlements being surrendered and confirming that any payments will be treated as capital rather than as income. However, it must also consider what provisions it will put in place for any land released by those participating in schemes.

“We are hopeful that DEFRA will not place restrictions on what landlords can do with land released from tenants taking part in the scheme as this will reduce participation. However, allowing the scheme to be used in the context of a tenancy succession would both ease tenants into retirement whilst bringing on the next generation.

"Owner occupiers who want to take part in the scheme, rather than being required to sell their land to prove that they had left farming, could be given the option to rent it out on long-term agreements. With 89% of all new tenancies let for five years or less it would make sense and fit with Government policy to encourage longer term tenancies, for owner occupiers participating in the scheme to be required to let out their land for 10 years or more,” he concluded.