Lump sum exit scheme tax clarified

HMRC has clarified that payments made to farming businesses under the Lump Sum Exit Scheme (LSES) will be treated as the disposal of a capital asset and not as trading income. That brings the tax treatment in line with the sale of BPS entitlements and the same reliefs (such as business asset disposal relief from Capital Gains Tax) will be available where the other qualifying conditions are met. There had been some speculation that payments under the LSES could be taxed as income which would have created a disincentive to farming businesses to apply. Is is therefore useful that this has been clarified. The legislative changes will be included in the 2022-2023 Finance Bill but will be backdated to 6 April 2022.