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Monday, 29 September 2014

Payment Entitlement Transfers and the October deadline

We are getting a few queries from our agricultural clients about entitlement transfers and the Defra's October deadline, and in particular about the consequences of not transferring by then. The Q&A below might help.
1. Why is there an October deadline instead of the usual 2nd April deadline?
This is purely a question of practicality. The Rural Payments Agency needs to 'convert' Single Payment Scheme entitlements to Basic Payment Scheme entitlements and will take the transfer system off line to do that. On 1st January 2015 you will hold the same number of BPS entitlements as you had SPS entitlements on 31st December.
The transfer window will open again at some point from mid-January onwards; the exact date will be confirmed by the RPA later this year.
2. Is there any advantage to transferring SPS entitlements now, ahead of the new year?
From 1st January 2015, payment entitlements will only be transferred to those who qualify as an active farmer under the new scheme rules. That test does not apply to transfers that take place this year under the current SPS scheme. Apart from that small saving in bureaucracy, transferring now does not confer any great advantage; in order to be eligible for payment under the Basic Payment Scheme you will need to be an active farmer.
Of course, farmers who are buying land or taking on Michaelmas tenancies may prefer to have the payment entitlements transferred to them now, at the time of the transaction rather than next year.

3. When exactly is the deadline?
The deadline by which your RLE1 form must be received by the RPA is midnight on 21st October. (This date has been put back a couple of days from Defra's original 19th October deadline, as explained in the August CAP Reform update.) In line with current practice, the actual transfer will take place 6 weeks after the form is received.
4. What do I put down on the RLE1 form as the "effective date of transfer"?
If you want the entitlements to be transferred under the current regime, the 3rd December must be the latest effective date of transfer in box B3 (b). That equates to 6 weeks from 21 October. Alternatively, if you leave that box blank the RPA will complete the transfer 6 weeks after the form was submitted.

5. What happens if I miss the 21 October deadline or put an effective date of transfer that is after 3rd December?

The entitlements will not be transferred. On 1st January 2015 you will hold an equivalent number of Basic Payment Scheme entitlements as you held SPS entitlements on 31st December. If you want to transfer those entitlements you will need to submit a transfer request using the new CAP Information Service.
6. What happens next year if I have more BPS entitlements than eligible hectares?
You will lose your surplus entitlements. If you know you are going to have surplus entitlements, you may want to consider selling them, either now or in the new year once the transfer window re-opens.  
If you would like further advice about the implications of the new Basic Payment Scheme for your farming business, please get in touch with Julie Robinson (01775 842618).

Sunday, 10 August 2014

Planning for the Basic Payment Scheme and Greening

Farmers involved in specialist cropping, contract farming, block-cropping or diversification may need to take a step back and consider how things are best structured to ensure compliance with the new Basic Payment Scheme and Greening rules.

Being a farmer with non-farming interests does not of itself put you at risk from the ‘Active Farmer’ test. Only businesses that operate so-called negative list enterprises are caught. Those enterprises are airports, railway services, waterworks, real estate services, permanent sports and recreational grounds.
The latest guidance from the European Commission says that, as far as ‘real estate services’ is concerned, it does not consider farmers who let out farm cottages on their farms as falling into this category. The target is property developers and estate agents.
If your business does fall into one of the negative list categories, you will have to jump through one of three hoops to qualify as an active farmer. Two of these are admin-heavy income-related tests, but the third – demonstrating that agriculture is a principal object of the business – should be more manageable for businesses which have farming at their core. We await further details from Defra about what evidence will be needed.
Specialist cropping
Specialist crop growers who depend on taking arable land on rotation from other farmers can no longer ignore the impacts of farm subsidies. What used to be done on a handshake now needs to be documented. Parties need to make sure not only that the agreement passes muster with the RPA inspector (e.g. with regards to responsibility for cross-compliance and any environmental stewardship) but that it works between the parties. It is a commercial agreement, not simply a box-ticking exercise. At the very least it needs to set out what needs to be done and when, who is responsible for what, and what happens when things go wrong.

Broadly speaking farmers and specialist croppers have four basic options: (a) an FBT, (b) a contracting agreement, (c) a cropping licence, (d) a share farming arrangement.
The new definition of farmer under the Basic Payment Scheme is helpful. As well as someone who grows crops, a farmer is someone who keeps an area “in a state that is suitable for grazing or cultivation without preparatory action going beyond usual agricultural methods and machineries.” We are still waiting for final details from Defra but most arable farmers who have crops on their land should be able to fulfil that secondary definition.
JVs, contracting agreements and the 3-crop rule

One of the biggest concerns voiced by arable farmers is how Greening will impact where holdings which are contract-farmed fall just above the 3-crop threshold.  Equally, farmers who set up joint ventures to increase efficiency by block-cropping their farms are concerned about how to maintain that efficiency if each separate farm has to grow three crops again.
Share-farming may be a way forward. It will not work in every circumstance, but for some it will make more sense for the business that bears the greater part of the responsibility for managing Greening features to be BPS and greening payment claimant.


Points to watch

Entitlement transfer deadlines – the first of these, with transfers governed by the current SPS rules, is midnight on 19 October 2014. Any 2015 transfers will be subject to the new BPS rules, including its active farmer provisions.
Changes to eligible land definitions – watch in particular the distinction between arable and permanent crops for the purposes of calculating Greening obligations. Some crops originally excluded from the permanent crop definition for SPS purposes now fall under the permanent crop heading (e.g. asparagus, raspberries, artichokes).
Non-agricultural use rules – as under the present regime, land that supports a claim has to be eligible for the full scheme year, but with an allowance for an element of non-agricultural use as long as the area is predominantly used for agricultural activities. Defra has indicated that the rules are likely to be similar to what we have now. 
Principal objects of your business  if your business operates any of the ‘negative list’ enterprises, but agriculture is a principal object of the business, make sure official documents say that (e.g. company objects /VAT registration/annual accounts).
Distinction between BPS and Greening  – one for the professionals, but BPS and Greening are two separate payment schemes and both need to be addressed in contracting, tenancy and land sale/purchase agreements.




Sunday, 29 June 2014

Exclusivity clauses in zero hours contracts - impacts for agriculture

As you will have seen from our general employment update there are proposals from Vince Cable (Business Secretary) to ban exclusivity clauses in “zero hours contracts”.

Whilst zero hours contracts have received a pretty bad press over recent months they have been an important part of the way in which farm businesses have dealt with seasonal peaks of activity at harvest and other times.

The exclusivity clause operates so as to prevent the employee from having a job elsewhere whilst on your books. When you are busy this is important – the weather can demand that you need everyone in and if one member of the team is working elsewhere that might have a significant impact.

In standard form harvest contracts there will typically be an exclusivity clause. The most obvious solution that comes to mind would be to delete any exclusivity clause but with farm businesses making an enhanced “sales pitch” when recruiting so that harvest staff feel they want to commit. We need to see the fine print of the promised legislation; only then we will be able to advise in detail what changes ag and hort businesses need to make to their paperwork and practices.
If you would like further information about zero hour contracts, or would like advice on other employment matters,  please contact our employment specialists Phil Cookson, Maz Dannourah or John Cameron.



Saturday, 7 June 2014

Safety on farm: should you have a social media policy?

Farms are one of the most dangerous places to work. According to the Health & Safety Executive, while just over 1 in 100 GB workers work in agriculture, the sector accounts for about 1 in 5 fatal injuries to workers.
Does the rise in social media use add to the risk? For office-based businesses, social media 'issues' tend to be about using work time for keeping up with news from your friends and family. For farm businesses the safety issue is at the fore. Machinery and messaging your mates don't mix; handling livestock and your handset at the same time is a recipe for disaster. 

For those of you thinking about taking on extra workers over the summer months, how can you lay down some guidelines to make sure safety isn't compromised? One answer is to have a social media policy that sets out clearly where the lines are drawn, and to refer to it when necessary. Introducing it as part of a new starter's induction would make people aware of it from the outset.

Members of our employment and agriculture teams have put their heads together and drawn up a template social media policy for farm businesses, where workers have their own devices but do not have access to the farm’s own computer systems. Its main focus is on the health and safety aspects of smartphone etc. use around farm machinery and livestock.

You can download the template here.

Clearly, one size does not fit all situations and we strongly recommend that you review the draft against the specific needs of your own business to make sure it works for you.

If you would like further advice about this policy – how it can be adapted to your specific circumstances, when and how it can be introduced, or what to do in the case of serious or repeated breaches –  please get in touch with Maz Dannourah on 01775 842597 or by email.

Friday, 9 May 2014

Definition of Permanent Pasture

The Single Payment Scheme definition of permanent pasture has come under challenge in the EU Court of Justice. The SPS defines permanent pasture as “land used to grow grasses or other herbaceous forage naturally (self-seeded) or through cultivation (sown) and that is not included in the crop rotation of the holding for five years or longer”. 

A German farmer who had reseeded his grassland with a different mix, brought a case in which he argued that the reseeding operation broke the continuous five-year period and that his land should not be considered as permanent pasture. He wanted to let the land, and arable land attracted a higher rent.

Ahead of the Court making its final decision the advisory opinion of Eleanor Sharpston, the Advocate-General to the Court, has been published. Her opinion is that where land is used for growing grass or herbaceous forage, the five-year permanent pasture qualifying period is broken if the land has been ploughed and reseeded with a different grass or herbaceous forage crop. Operations that fall short of removal of the previous crop (e.g. harrowing and over-seeding) will not break the qualifying period.
Basic Payment Scheme and Greening
The distinction between arable land and permanent grassland is crucial. Under the new 'greening' rules Member States have an obligation to maintain levels of permanent pasture, and the extent of a claimant's ecological focus area is triggered by how much 'arable' land he has (with some exemptions in place for predominantly grassland farms).
We’ve all adopted the “if the field has been in grass for five years or longer it is permanent grass, whether or not it has been reseeded” line. Until now that has been fine and, from an administrative point of view, is reasonably straight forward. If the European Court does adopt the Advocate-General’s opinion, things could change.

CAP regulations  have always involved a certain amount of legal fiction. Definitions might not stand up to logical analysis but provide workable ways of implementing a support schemes without complete bureaucratic meltdown. A change to the permanent pasture definition that reflects the reality of ploughing and re-seeding may make sense to many, but will add to the uncertainty the new scheme already brings with it.

The Advocate-General’s opinion isn’t the last word – the Court of Justice has to make its own ruling in due course, but in the vast majority of cases it adopts the Advocate-General’s advice. This isn’t great timing for a court decision that upsets the current thinking on permanent pasture even if it does not change things on the ground for many UK farmers.

Permanent grassland definitions
Current Defra/RPA guidance
“If you enter land as grass or herbaceous forage on six consecutive SPS applications the land is classified as permanent pasture at the sixth application…if you have re-sown land with grass or other herbaceous forage during the five years, it is still permanent pasture.”
Basic Payment Scheme definition
“Land used to grow grasses or other herbaceous forage naturally (self seed) or through cultivation (sown) and that has not been included in the crop rotation for five years or more…”
Advocate-General’s opinion
“Where the [grassland] area has been ploughed up, removing the previous crop, and reseeded with a different type of herbaceous forage, then there is crop rotation precluding classification as permanent pasture. Where, however, the previous crop is not removed by ploughing up the land but is partly modified by overseeding, then there is no crop rotation and the area is to be classified as permanent pasture.”

Wednesday, 2 April 2014

Planning for the future: have rural developers been given a free rein?

On 6 April 2014 new planning rules come into force which will allow developers to make certain changes of use without the need to jump through the hoops of obtaining full planning permission. Under the new rules, impressively named the Town and County Planning (General Permitted Development) (Amendment and Consequential Provisions) (England) Order 2014, a “fast-track” system is introduced making it quicker and cheaper to develop in these areas.

Which changes of use will be affected?

The changes of use which will benefit from this new, relaxed system are known as “permitted developments” and will include:

·       allowing agricultural buildings to become schools or nurseries;

·       allowing agricultural buildings to be used for residential purposes; 

·       allowing a shop to become a bank, building society or credit union;

·       allowing a shop or building used for provision of financial or professional support to become  used for residential purposes.

From the list it is clear that the rules focus on the conversion of agricultural and commercial buildings into residential dwellings and supporting facilities, no doubt to help meet the ever increasing demand for housing and boost economic growth in rural areas. As such, the rules offer farmers and owners of commercial premises the opportunity to diversify and change the use of buildings which may not at present be providing much, if any, return.

How does the new system work?

If the change of use is a permitted development the developer does not need to go through the rigmarole of obtaining full planning permission from the local planning authority because it cannot, as a matter of principle, object to the change of use. That said, an application will still need to be made to the planning authority before any works start.

Tuesday, 21 January 2014

CAP Reform: what is agricultural activity?

Aside from the introduction of greening measures, one of the most significant changes in the new direct payment regime touches on what constitutes agricultural activity. Under the Single Payment Scheme, agricultural activity was not only producing crops and keeping animals etc., but also simply maintaining the land in good agricultural and environmental condition. This definition has now been dropped.
It has been replaced with what might turn out to be a more workable definition, particularly for field veg. and potato growers and for those who provide land to them for short-term cropping.
The Basic Payment Scheme defines agricultural activity as, among other things, "maintaining an agricultural area in a state which makes it suitable for grazing or cultivation without preparatory action going beyond usual agricultural methods and machineries".
A framework will now be drawn up by the European Commission. Based on that framework, Defra will fix criteria for the application of the definition here in England. So we are not home and dry yet; we need a pragmatic set of criteria from the Commission and the government that reflect the realities of rotational cropping, seasonal grazing and the role of long-term land managers.
If you have any questions about the implications of the current reform, speak to your usual Roythornes contact or contact Julie Robinson on 01775 842618.