Deadline for applications for Lump Sum Exit Scheme – Basic Payments

The Lump Sum Exit Scheme is a government programme run by the Rural Payments Scheme that will enable farmers to receive some of their future basic payment scheme (BPS) payments upfront. In return, the farmer will be required to surrender their BPS entitlements and either rent out or sell most of their land or give up their tenancies. The payments are calculated as an average of the farmers BPS receipts from 2019 – 2021 multiplied by 2.35 and there is a ceiling to the payments of less than 100,000 pounds. The application window opened on 12th April 2022, and applications must be made by the deadline of the 30th of September 2022.

In 2021, as part of the Agricultural Transition Programme (ATP), Defra completed a consultation on the administration of direct payments and also a lump sum exit payment for farmers who may be looking to leave the industry. The reason for the scheme is to assist farmers who want to exit the industry in a planned way either through retirement or other reasons. The payments are said to provide farmers with a meaningful choice about their future, with many farmers considering their positions in the current challenging circumstances  The Tenanted Farmers Association believes such lump sum payments will not be enough to help farmers retire, although they concede that if such payments are part of a combination of retirement provisions it will help some. 

The lump sum payments will be treated by HMRC as capital rather than income.

If you decide however to take such schemes you will no longer be trading and therefore inheritance tax relief (IHT) and capital gains tax (CGT) relief will apply at reduced rates. We recommend that you take tax advice for your specific circumstances. 

It is worth noting that if you have given up land since 2020, you can still qualify for the lump sum exit payment despite not having claimed BPS in 2021. Delinked payments are also available, and these will be treated as income.

At Hibberts, we work closely with accountants and land agents so that you can structure your planned retirement. You can find out more from our Agricultural team here.