Defra have at last put some meat on the bones of the guidance for applying to claim the English Lump Sum Exit Scheme – unfortunately the guidance is still lean in some areas.
Full current guidance is at https://www.gov.uk/government/publications/lump-sum-payments-for-farmers-who-leave-or-retire-from-farming-and-delinked-payments/lump-sum-exit-scheme-and-delinked-payments-how-the-payments-will-work
If you claim the Lump Sum, you would not be able to claim BPS going forward – this would include all partners in a farming partnership. As the scheme application window is scheduled to run April 2022 to September 2022, if you claim the 2022 BPS, the value of the 2022 BPS will be deducted from the Lump Sum, and you have until 2024 to “dispose of“ agricultural land. You are able to retain 5 hectares and retain any land entered into some woodland creation schemes, non-agricultural land & buildings or the farmhouse.
So how much do you get? The lump sum value is the average of the last 3 years BPS x 2.35, so if 2019 BPS was £40,000, 2020 £41,000 and 2021 £35,000, the average is £38,667 x 2.35 = £90,867 lump sum. The lump sum is capped at £100,000.
How much tax? DEFRA have said that the lump sum will be taxed as Capital Gains. This is all well and good, but HMRC must agree and legislate for this before the tax treatment is really known. This is good news if it is legislated to be CGT, as there are extra annual allowances, no national insurance on capital gains, and potentially a reduced tax rate too.
It should be noted that this scheme is only for England. This means that theoretically, and English BPS claimer could sell/rent out their English land, then take on land in say Scotland and claim Scottish BPS for 2022 to 2027.
Could this work for your business? If you want to know more or simply chat through your options, please contact our team.