Farmers need to get their affairs in order after Brexit changes
Farmers are being urged to ensure they have up-to-date succession plans in place following the start of the Agricultural Transition Plan which came into being after the UK’s departure from the EU.
Tom Chiffers, a partner in our Private Client team, says farmers have entered into a period of great change and need to be ready to deal with the consequences to avoid future costly disputes over succession.
The government’s Agricultural Transition Plan (ATP) outlines a timescale to change the way farming is funded, managed and incentivised which will have a significant impact on the income of farms and the farming industry.
Tom says that the support payments farmers currently receive in the form of BPS will start to be phased out from 2021, becoming delinked in 2024 and eventually getting replaced with a system which pays farmers for specific types of environmental land management.
“All direct payments will be reduced progressively but with bigger reductions on the higher payment bands; operating much like income tax bands. For example, everyone will have a reduction of 5% on their first £30,000 of payments in 2021.
“The higher reduction rates will apply to those farms currently receiving larger direct payments. A farm receiving more than £150,000 will see a 25% reduction in 2021 followed by 40%, 55% and 70% reductions in the subsequent scheme years with the last of the direct payments being made in 2027.
“Meanwhile the direct payments will be replaced by a new universally accessible Environmental Land Management (ELM) scheme, that will reward farmers, growers and land managers for delivering public goods, with an anticipated 50-60% drop in funding in real terms by 2030.
“Defra is also offering a lump sum exit scheme from 2022 to help farmers who wish to retire in place of any further BPS and delinked payments enabling them to capitalise the future stream of direct payment income that would otherwise be available until 2027.
“Whilst there is still much uncertainty and lack of clarity as to what the new payment schemes will look like, there is an expectation there will be a significant drop in funding for all farmers at the end of the transition plan in 2027.”
“In addition to the ATP, the government has also been applying greater scrutiny to both inheritance tax and capital gains tax and given its current pandemic spending, there are concerns that the generous inheritance tax reliefs currently available to farmers in the form of Business Property Relief and Agricultural Property Relief could be cut or even abolished to help pay for the furlough scheme and other COVID-19 support schemes. The government may announce their future plans for changes to the inheritance and capital gains tax regime as part of their post budget announcements on 23 March.
“All of this means that farmers need to be in a state of financial and legal preparedness with a robust succession plan in place which should include the right kind of will.”
Clarke Willmott has recently launched its #GoodWill campaign which aims to encourage people to take steps to safeguard their family’s future wealth by pledging that they will make a will this year.
Which Will? is a free, online questionnaire designed to help you think about what is important to you when making a Will. Upon completion you will receive a recommendation for the will we believe best meets your needs.