Our view on the Agriculture Bill 2018

The long-awaited Agriculture Bill was published on 11th September

The Bill is essentially a piece of enabling legislation, setting out broad powers for the Secretary of State to amend or introduce more detailed legislation by statutory instrument. It is obviously intended to pull together a number of new initiatives which have appeared piecemeal over recent months including the key “Health and Harmony” consultation.

The key objectives of rewarding the delivery of measures to improve the quality of air, water and soil and public access to the countryside are clearly set out. It also gives the power to address concerns about animal and plant health, regulation and enforcement regimes, the agricultural food chain, unfair contracts between farmers and their customers and the impact of price volatility within the industry.

The Bill also looks to give statutory form to some measures which had previously been promised:

  • For 2019 and 2020 the amounts paid under BPS or a post Brexit replacement scheme will be the same as previously. There is a power to amend greening rules, including the ‘three crop’ rule which many have found restrictive.
  • Between 2021 and 2027 there will be a seven-year transition period during which flat rate support will be phased out. The phasing will be more rapid for larger holdings. There is a power to extend this period if required.
  • The transition payments will be ‘delinked’ so that claimants will not need to continue farming to claim. There will be an option to take the delinked payments as a lump sum where farming ceases. The quantum of the delinked payments will be based in some way on the previous BPS history, but it is not yet clear which BPS years will be considered.

The Bill makes no mention at all 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. As 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.

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

A version of this blog originally appeared on the website of one of our MHA association member firms, MHA MacIntyre Hudson.