The Lump Sum Exit Scheme for English farmers looking to leave the industry will open for applications from April 2022 until the end of September 2022. More guidance about the scheme, including how to apply, and what evidence you need to provide will be published before applications open. The scheme rules will be set out in new regulations which are expected to come into force by the end of April 2022, following Parliamentary approval.
Managed by the Rural Payments Agency, the Lump Sum Exit Scheme will enable participants to receive some of their future Basic Payment Scheme (BPS) money upfront. This is in return for surrendering their BPS entitlements, and either renting out or selling most of their land or giving up their tenancies.
To help create more opportunities for new entrants to the industry or for those farmers wishing to expand, lump sum claimants will have to transfer out their agricultural land in England. Farmers will be allowed to keep up to 5ha, plus any agricultural land they plant with trees under certain woodland creation schemes plus their farmhouse, commercial buildings, and non-agricultural land.
- It is advisory to still apply for BPS for 2022 in case you a) are not accepted or b) change your mind over the coming months, based on rules and guidance to be published.
- If you apply and are successful, the 2022 BPS payment will then be deducted from the Lump Sum Exit Scheme payment.
- You will have until 31st May 2024 to transfer the land out and provide evidence of this.
- You have until 31st May 2024 to:
- surrender to RPA, all English BPS entitlements you own which are not leased-out
- confirm that you will surrender to RPA, any English BPS entitlements you own which are leased out, with the surrender coming into effect at the end of the entitlements’ lease.
- If you apply and are successful, you are not eligible for future BPS payments or delinked payments.
The lump sum will be based on the average BPS received by the farmer from 2019-21 with a total payment ceiling of approximately £100,000 applied. This will be treated as ‘capital’ not ‘income’, resulting in lower tax bills. Once the lump sum has been received, farmers will not be able to claim any further BPS in England.
- The payment will consist of your 2019, 2020 & 2021 BPS totals added together, divided by 3, to get the average (reference amount)
- The reference amount is capped at £42,500
- Lump sum payment = reference amount x 2.35
- This calculation means that (except for farmers affected by the cap), the lump sum will be equivalent to the amount you could have received in Direct Payments for 2022 to 2027. This takes account of the announced progressive reductions for 2022 to 2024 and continued gradual reductions until the end of 2027
As farmers interested in taking advantage of the Lump Sum Exit Scheme are being warned to look out for ‘inheritance tax traps’ with any decision they make, professional advice should always be sought.
Find out more about the Lump Sum Exit Scheme and delinked payments using the following link Lump Sum Exit Scheme and delinked payments: how the payments will work – GOV.UK (www.gov.uk)
