30 December, 2010
A blog by Kate Theophilus, a Member of the Coodes Rural
The Single Farm Payment Scheme (SPS) was introduced in 2005 to
replace (with the exception of milk quotas) existing support
schemes. In an attempt to simplify what is a complex system
new European Regulations containing various amendments to the
scheme came into effect on 1 January 2009 and 1 January 2010.
Set out below are a few small examples of where changes have been
made, it is not intended to be a comprehensive list.
Some basic definitions
The definitions of "a Farmer", "a Holding",
"Eligible Land" and "Agricultural Activity" have been
amended/widened to simplify matters. Included under the definition
of Agricultural Activity is the process of 'maintaining the land in
good agricultural and environmental condition'.
The Ten Month Rule
Previously, to qualify for the SPS, the land had to be 'at the
farmer's disposal for at least 10 months of the year.' The 10 month
period began on a date chosen by the farmer between the 1st October
and the 30th April of the year preceding making a claim. If no date
was chosen, then the default date was the 1st February. This
process resulted in it being possible for the farmer to have two
different start dates for the 10 month period for different parts
of the same holding.
The new Regulations abolished the 10 month rule with effect from
the 1st April 2008 and replaced it with the requirement that the
land had to be 'at the farmer's disposal at an "appropriate date."
DEFRA chose the "appropriate date" as the 15th May in each year.
Therefore provided a farmer has at his disposal on the 15 May the
land in question, he can make the appropriate claim. As an
application has to be received by the Rural Payments Agency (RPA)
by the 15th May each year, the effect is that a farmer need only
have the land at his disposal for one day in order to make a
Any National Reserve entitlements not used for a period
of two years will be forfeited to the National Reserve. Previously
it was three years.
The rule requiring entitlements allocated from the National
Reserve not to be transferred during the first 5 years and the need
that they must be used in each of those 5 years has been abolished.
In 2009 National Reserve Entitlements commuted to normal
Set-Aside entitlements have been abolished and converted into
ordinary entitlements, they have a lesser value due to the fact
that they do not attract a historical element.
The Need to be a Farmer at point of Transfer
The transfer of entitlements previously required the
Transferor and the Transferee to be farmers at the date of the
transfer. This caused problems for farmers who were retiring
bearing in mind the transfer does not take place until 6 weeks
after the appropriate RLE1 Form is lodged with the RPA. As a result
therefore, since 2009, the RPA now only insist that the Transferee
is a farmer at the relevant time. The effect of this is that it has
done away with the need for a series of short term agreements
involving leasebacks and farming contracts which were previously
used to protect the Transferor's status until registration with the
RPA was complete.
Percentage sale without land
The previous requirement that the transfer of
entitlements without land could only be effective if 80 % of the
overall entitlement holding had been activated has also been
In addition to satisfying certain criteria to obtain payments,
farmers also have to carry out obligations relating to the
environment and animal welfare. This is known as 'Cross
Compliance.' Concerns arose as a result of the abolition of
Set-Aside that cross compliance may not be met. This is an area
which is still under review and further details are awaited. That
said there are some new categories under the current cross
compliance regime, one of which is the need to comply with
legislation relating to water abstraction and licences granted
under the appropriate legislation.
The first €5,000 of any claim remains exempt. Basic Compulsory
Modulation remains at 5% but there is an additional Compulsory
Modulation of 2% introduced in 2009 rising in steps of 1% per year
to 5% in 2012. In addition there will be additional modulation for
those receiving payments of more than €300,000.00 who would lose a
further 4%. Voluntary Modulation Regulations have been
amended so that for every 1% increase in Compulsory Modulation,
Voluntary National Modulation is reduced by 1%.
Minimum extent of land for a claim
The new Regulations require member states to introduce a minimum
level for an acceptable claim and as from 2010 within the UK, the
minimum area of land for which an acceptable claim can be made is 1
hectare. This is an increase on the previous level.
Payments under the SPS are a valuable asset to farmers and
landowners alike. Therefore careful consideration should be
given as to the ultimate destination of entitlements in the event
of letting land or death. Entitlements do not attach to
land but are an asset in their own right and if not dealt with in a
tenancy agreement or a will may not end up where the owner of the
entitlements intend. It is always advisable to seek
* The National Reserve is in effect a "pot" of entitlements set
up under the scheme to support farmers whose business changed
during or after entering the scheme, which as a consequence reduced
their entitlements. The existence of the Reserve enabled those
farmers to apply for entitlements from the "pot" so as to increase
the amount of entitlements they had.
It also enabled new entrants to farming who may have land but no
entitlements to obtain some, especially if they are unable to buy
any on the open market. These are known as National Reserve
Kate Theophilus is a Commercial Property Solicitor and
Partner in Coodes' St.Austell branch. Kate specialises
in all types of Commercial Property law and is up to date on all
issues and regulations in and relating to the commercial property
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