November 21, 2012

What’s the latest on CAP reform?

On-going uncertainty over the Common Agricultural Policy (CAP) Reforms shouldn’t prevent you from getting on with your plans – whether that’s diversifying, expanding, introducing new management structures, exiting or whatever else you might want to do with your farming business. The key is to ensure that all documentation is drafted in such a way that you can still benefit from the various entitlements once the details of the Reforms have been properly worked out.

It appears that the European Commission still intends to try and implement the new direct payment system, which will replace the current single payment scheme (SPS) from 1st January 2014 – although many of us believe the scheme will be delayed by at least a year.

Even so, we need to keep an open mind when it comes to dealing with agricultural land and the business structures through which farms are operated. While the new “Basic Payment Entitlements” will be allocated by reference to the land held in 2014, careful consideration must be given to contracts and tenancy agreements to ensure that the intentions of the parties is clearly set out.

This will be particularly important when it comes to claiming and establishing the new basic entitlements. At present, to qualify for an allocation of new entitlements, you must have claimed the single farm payment in 2011. The idea behind this “Reference Year” is to stop landlords seeking vacant possession between now and the end of 2013, in order to claim the 2014 allocation.

For those who didn’t claim under SPS in 2011, there may be an element of uncertainty. All member states will be required to provide a top-up to young farmers (those under the age of 40 setting up an agricultural holding) but given rising land values and set-up costs, most new entrants are unlikely to be the right age or meet the other criteria.

This may also impact on those looking to bring in the next generation as the introduction of a new partner may present barriers for 2014 allocations. There may also be implications for those wanting to change their business structure, for example operating the farming business for a company or a limited liability partnership.

Much remains uncertain but this does not necessarily mean you should put your plans on hold. By ensuring that you take the right advice from your professional team, you will be able to see whether your proposals are going to have implications when it comes to the 2014 allocation. If there are implications, there may still be ways to enable you to implement your changes or plans while preserving your position. The key is to ensure the documentation is structured in the right way.

For further information, please contact Angus Williams, partner and head of property, farms and estates at Withy King in Bath on 01225 730100 or email [email protected]

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