Delinked payments

Delinked payments

Defra has updated its guidance on the delinked payments that will replace the current Basic Payment Scheme (BPS) with effect from 2024.

The guidance re-confirms that the 2023 BPS claim year will be the last. It also confirms that the reference amounts that will be allocated to eligible businesses (which will be calculated by taking the sum of BPS claims in the 2020-2022 claim years and dividing by 3) will be transferable to other eligible businesses.  With a few exceptions, such as inheritance on death and business merger or scission, it will only be possible to transfer reference amounts to a business that made an eligible BPS claim in the 2023 claim year.

The obvious losers under that rule are new entrants who may have been expecting to be able to receive the exiting business’ reference amount as part of the deal to purchase the farm or take a tenancy of it. In those cases, the exiting farmer could retire altogether and still receive the delinked payment until 2027, which is when it is set to be phased out, or sell their reference amount to an ongoing business that made a valid BPS claim in 2023.  An alternative in some circumstances may be for the new entrant also to acquire the existing business as part and parcel of purchasing or taking a tenancy of the farm but we will need to see more details around the transfer rules to establish if that could provide a solution for those who would like to find one.

The guidance confirms that where a business receives delinked payments they will be taxed as trading income.

Defra says that further guidance on the process for receiving de-linked payments will be published “later this year”.

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