The Agricultural Bill – a summary from MHA MacIntyre Hudson

Friday 14 September 2018

The long awaited Agriculture Bill, which was published on 11 September, gives the Secretary of State powers to introduce legislation by statutory instrument in order to implement the new post Brexit agricultural policy outlined earlier this year in the Health and Harmony consultation.

The main thrust of the Bill is to restore the health of the farmed environment, improving the quality of air, water and soil. There are also proposals to broaden public access to the countryside and to address concerns about animal and plant health. The Bill also picks up other issues such as the vulnerability of farmers within the food supply industry and the effect of volatility in agricultural prices.

Most importantly, the Bill also looks to give statutory form to some specific measures which had previously been promised:

• For 2019 and 2020 the amounts paid under the Basic Payment Scheme (BPS) or a post Brexit replacement will be very much the same as previously, but some EU rules may be relaxed
• The transition period for the new regime has been set at seven years. Larger subsidy reductions will be implemented sooner for bigger farms
• The transition payments will be ‘delinked’ from agricultural production and there will be an option to take the delinked payments as a lump sum where farming ceases.

The Bill makes no mention of the tax consequences of any proposed changes, but a provisional analysis suggests that the delinked payments are likely to be treated as income in the hands of the recipient, probably even if taken as a lump sum. Because the delinked payments will have no connection to ongoing farming activities, such income might be deemed unearned, which could have implications for those who wish to use it to fund pension contributions.

Since the previous subsidy scheme will come to an end in 2020 or 2021, it would appear that when purchased subsidy entitlements become worthless it will give rise to a constructive loss relief claim for Capital Gains Tax purposes, but this will be of limited use for many farmers.

Commenting on the Bill, MHA MacIntyre Hudson partner Sarah Dodds said: “Clearly this Bill heralds in major changes for UK farming. Our major concerns are that there is still no detail on how far the funding for the new environmental schemes will compensate the industry for the massive structural changes which will be involved. We also believe that any lump sum amounts paid on retirement should be treated as capital payments for tax purposes, to enable retirees to leave the industry more easily should they wish to do so”

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