The Tenant Farmers Association (TFA) has welcomed the publication of the scheme details of the long-awaited DEFRA Basic Payment Scheme (BPS) Lump Sum Exit Scheme in England.

Applications for the Lump Sum Exit Scheme are due to run from April until the end of September 2022. The Lump Sum Exit Payment received will be based on the average direct payments made to the BPS applicant from 2019 to 2021. This reference figure will be capped at £42,500 and multiplied by 2.35 to calculate the lump sum, meaning that farmers could receive up to £100,000. HMRC has confirmed that the payment will be treated as capital and not income – the latter would have made the scheme a non-starter for most farm businesses looking to participate.

Commenting on the announcement, TFA Chief Executive, George Dunn, said “with Lump Sum Exit Payments limited to a maximum of £100,000, the scheme is never going to provide a sufficient amount of money on its own to assist people into retirement. However, if combined with other available resources, such as settlements negotiated in the surrender of a tenancy, the sale of live and dead stock and other pension provision, this exit scheme will benefit some farmers”.

The Lump Sum Exit Scheme is especially attractive to older, owner-occupiers with relatively small holdings and without available successors. In taking part in the scheme, DEFRA will allow retiring farmers to retain ownership of their land subject to granting a lease for a period of at least five years. They will also be able to continue living in the farmhouse and retain a holding no bigger than 5 ha.

“It is very disappointing that DEFRA has not been bolder in its aspiration, by requiring these owner occupiers who take part in the Lump Sum Exit Scheme to offer tenancies of at least 10 years or more. With 90% of all new tenancies already let for only five years or less, this would have been a good chance to create more sustainable tenancy opportunities,” said Mr Dunn.

Other possible potential beneficiaries are tenant farmers with rights of tenancy succession and who have eligible and suitable successors waiting in the wings. The Lump Sum Exit Scheme will allow the retiring tenant to participate with the successor taking on the holding. Thirdly, tenant farmers, either with lifetime agreements or without successors, might be attracted to take up the scheme, particularly if they are able to have a sensible negotiation with their landlord to obtain, alongside the scheme money, a sum of money to surrender the lease back to the owner.

“Landlords should not waste this time limited opportunity, there are many who have been extremely keen to obtain the vacant possession of land that may have been held by generations of farm tenants. Disappointingly, we have heard of situations where landlords have sought to scale back offers for tenancy surrender previously made, on the basis that the tenant will now be obtaining the benefit of the Lump Sum Exit Scheme. Landlords should not be greedy, this scheme is designed to assist individuals into retirement, not to line the back pockets of landowners and to give them the option of a cheaper deal,” said Mr Dunn.

The TFA has concerns that some tenant farmers will not be able to complete all the necessary legal steps to finalise arrangements in order to exit the industry within the time requirements set out by the scheme.

It is hoped that the new Tenancy Working Group established by DEFRA, to be chaired by Baroness Kate Rock, will look at these challenges in order to make recommendations to DEFRA about scheme design.