CAP Reform Overview Workshop presentations - Swaffham, 7 March 2014
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CAP Reform Overview Workshop presentations - Swaffham, 7 March 2014

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CLA CAP Reform Overview presentations from Birketts and Strutt & Parker - Swaffham, 7 March 2014

CLA CAP Reform Overview presentations from Birketts and Strutt & Parker - Swaffham, 7 March 2014

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CAP Reform Overview Workshop presentations - Swaffham, 7 March 2014 CAP Reform Overview Workshop presentations - Swaffham, 7 March 2014 Presentation Transcript

  • DOES THE NEW CAP FIT? James Dinwiddy, Birketts LLP 7 March 2014
  • Page 2 NEW SCHEME • The new scheme will become effective on 1st January 2015. • The new scheme payments will be made up of several different elements:- • Basic Payment Scheme (BPS) – 70%; • Greening Payment – 30%; • Young Farmers Payment – up to 25% top-up.
  • Page 3 GREENING • The Greening Payment is separate from the BPS. • To qualify for the additional 30% you must satisfy the following:- • Crop diversification. • 10 – 30 ha of arable land must grow 2 crops. The main crop must not be more than 75% of the land cropped. • More than 30 ha of arable land must grow 3 crops. The main crop must not be more than 75% of the land cropped and the two main crops must not be more than 95% of the land cropped.
  • Page 4 GREENING • Ecological Focus Areas (EFA) • More than 15ha arable land must have 5% EFA on or adjacent to arable land. • E.g., nitrogen fixing plants, ponds, hedges and buffer strips (not an exhaustive list). • Environmentally Sensitive Grasslands (ESG) • Control on permanent grassland at a national level. • EIA directives and undertakings under agri schemes remain in place. • Exemptions • E.g. organic farms, more than 75% pasture.
  • Page 5 YOUNG FARMERS • Up to 25% additional payment for young farmers for each of first five years of operation. • To qualify:- • A natural person; and • Not more than 40 years old in year of payment application; • Set up as a farmer or head of holding within previous five years; and • Up to 90ha
  • Page 6 ACTIVE FARMER • Must be an “active farmer” to claim the payments under BPS. • Must carry out a minimum agricultural activity on the land. • Payments will not be made to those on the “negative list”:- • Railway services; • Real Estate Services; • Permanent Sport and Recreation Grounds; • Airports; • Water Works.
  • Page 7 ELIGIBLE AREAS • Minimum area for a claim will be 5 ha. • End of “pony paddock” claims
  • Page 8 MODULATION There will be a movement of 12% from Pillar 1 to Pillar 2 in years 2015, 2016 and 2017. This may rise to 15% in 2018. 12% Pillar 2Pillar 1
  • Page 9 NON-CAPPING MEASURE “Degressivity” measure which basically means that although payments will not be capped at a particular level there will be a 5% reduction on basic payments over: 150,000
  • Page 10 CASE STUDY • Joe and Ben Farmer are co-owners of 700 hectares. They farm 600 hectares in hand and let 97 hectares to a neighbour called Mrs Sprout (due for renewal). The remaining 3 hectares are let to Ms Toggi. • Joe and Ben are also buying another 300 hectares from a neighbour. • Joe and Ben grow spring and winter wheat, barley, rape and beans. • Joe and Ben have an old written partnership agreement but Ben is thinking of retiring and Joe’s son Harry (also a farmer) may join the business. • Harry has a small holding of 20 hectares but is keen to do more. He turned 33 on 11 February 2014 and may want to join his father in the partnership.
  • Page 11 CASE STUDY Issues arising from the Case Study • Transfer of entitlements when Joe and Ben are buying the additional land. • As you were! – sale and purchase agreement should: • allow for the transfer of the specified amount of entitlements; • ensure cross compliance; • cover submission of the RLE1 form; • contain indemnities for any loss or reduction in the amount of entitlements transferred; • Degressivity – reduction in basic payment
  • Page 12 CASE STUDY Issues arising from the Case Study • Mrs Sprout’s FBT • include clause in renewal FBT allowing tenant to use the entitlements whilst in occupation and to transfer them back to the landlord at the end of the term.
  • Page 13 CASE STUDY Issues arising from the Case Study • Ms Toggi’s FBT • Miss Toggi only rents 3 ha which is below the minimum eligible area threshold of 5 ha. • will therefore no longer be able to claim.
  • Page 14 CASE STUDY Issues arising from the Case Study • Crop diversification • Joe and Ben’s in hand land – must grow three different crops. This could be the wheat, rape and beans. • They will need to have 5% of their land under EFA. Beans? • Cropping licence v FBT
  • Page 15 CASE STUDY Issues arising from the Case Study • Crop diversification • Harry’s Land – only needs to grow 2 crops because within the 10-30 ha band.
  • Page 16 CASE STUDY Issues arising from the Case Study • Young Farmers Scheme and business restructuring • Harry could qualify as a young farmer and obtain the top-up payment on the land he owns. • What if he became a partner in his father and uncle’s business? – probably not qualify as not head of holding; • any split of the business would be heavily scrutinised by the RPA.
  • Page 17 UNANSWERED QUESTIONS • EFA – what are they? • ESG – what land will be designated ? • How will the existing agri-schemes be affected by greening? • How will the national reserve scheme work? • Will dual claims be allowed?
  • Page 18 THANK YOU
  • CAP Reform Workshop Friday 7th March 2014 Richard Means
  • CAP Reform- Implications for your Farm • Entitlements • Greening Measures • Environmental Stewardship Overlap • Case Studies • Degressivity • 2014 SPS Applications
  • Entitlements  New Basic Payment Scheme introduced on 1st Jan 2015  Single Payment Entitlements ‘rolled over’ in England to Basic Payment Entitlements  Need to transfer Single Payment Entitlements by 19th Oct 2014  Surplus Single Payment Entitlements will be lost  Basic Payment Entitlements can transfer from 15th Jan 2015 to 2nd April 2015?
  • Entitlements – implications  Make sure in correct ownership  If taking on/giving up land in September – act quickly  Do sums now- sell surplus  2 year use rule
  • Greening Measures  Will make up 30% of the new annual payment  Non compliance penalty to rise to 37.5% by 2018  Ecological Focus Area (i)  Crop Diversification (ii)  Permanent Grassland (iii)
  • i) Ecological Focus Area (EFA)  5% of arable area (7% in 2018?)  Range of options  Nitrogen fixing crops – Input restrictions  Landscape Features  Exemptions: > 75% perm grassland or organic  Overlap with Environmental Stewardship
  • Ecological Focus Area EXAMPLE EFA WEIGHTINGS Landscape Features Unit Equivalent EFA area Comments Hedges /m 4.5 Up to 10m Wooded bank /m 12 Isolated tree /m 30 Crown >4m Trees in line /m 6 Crown >4m Field copses /m² 1.5 Overlapping crown <0.3ha Field margin /m 9 >1m Ponds /m² 1.5 <0.1 ha Ditches /m 3 <6m Fallow /m² 1 Buffer strips /m² 9 >1m Agro-forestry /m² 1 Forest edges /m² 9 >1m Short rotation coppice /m² 0.3 Catch crops/green cover /m² 0.3 Nitrogen fixing crops /m² 0.3 CAP Reform Workshop
  • Environmental Stewardship Overlap  Now closed existing schemes continue to end of term  No double funding allowed but;  Pre 2012 Agreements likely to allow options to be used for EFA  Post 2012 Agreements likely to suffer reduction where conflict with EFA  Some options can be used for ELS & EFA  New Environmental Land Management Scheme (NELMS) starts January 2016
  • ii) Crop Diversification  2 crops if over 10 hectares  3 crops if over 30 hectares  Main crop up to 75%; 2 main crops together not more than 95%  Third crop could be EFA but input restrictions  Exemptions: holding is organic; or >75% of the holding is permanent grassland and arable area is <30h >75% of the arable area is grassland/fallow and arable area is <30 ha > 50% of the arable new and not declared previous year- primarily for specialist cropping arrangements
  • iii) Permanent Grassland  Defined as grassland- established more than 5 years  Possibly grass margins?  2012/15 reference year – 5% tolerance  Administered at National level
  • Case Study 1 80 Hectares CFA Block Cropped  Pre reform rotation: year one 1st wheat, year two 2nd wheat, year three: OSR  Basic contractors charge: £250/ha, Farmers first charge £250/ha, 50% divisible surplus  Greening rotation: 50% first wheat, 45% OSR, 5% fallow + increased contractors charge £275/ha  Consider opting out of greening Pre CAP Reform With Greening (10% Increased Contractor Charge) Opting out of Greening (30% Reduction in SP) Average Arable Output £100,801 £93,960 £100,801 Gross Margin £55,867 £51,440 £55,867 Single Payment (£200/ha) £16,000 £16,000 £11,200 Net Margin £38,067 £33,240 £33,267 Divisible Surplus £18,067 £13,240 £13,267 Farmers Return £29,034 £26,620 £26,634 Contractors Return £29,034 £27,520 £26,634
  • Case Study 2 300 Hectares (Combinable) Farmed in Hand  Pre reform rotation: 1/3 1st wheat, 1/3 winter barley, 1/3 OSR  Greening rotation: 95ha 1st wheat, 95ha winter barley, 95ha OSR, 15ha fallow  Not worth opting out of greening Pre Cap Reform With Greening Opting out of greening (30% Reduction in SP) Arable Output £378,000 £359,000 £378,000 Gross Margin £209,500 £199,025 £209,500 Single Payment (£200/ha) £60,000 £60,000 £42,000 Profit (before rent) £134,500 £125,525 £116,500
  • Case Study 3 300 Hectares (High Value Crops) Farmed in hand  Pre reform rotation: 50% 1st wheat, 1/6 sugar beet, 1/6 onion, 1/6 pots  Greening rotation: 143ha wheat, 47ha s - beet, 47ha onions, 48ha pots, 15ha fallow * Rent paid for fallow land £7425, £495/ha (£200/ac)  Consider renting in ‘green’ area Pre Cap Reform With Greening Opting out of greening (30% Reduction in SP) Renting 15ha Fallow from 3rd party* Arable Output £886,500 £838,425 £886,500 £886,500 Gross Margin £614,200 £580,632 £614,200 £614,200 Single Payment (£200/ha) £60,000 £60,000 £42,000 £63,000 Profit (before rent) £404,200 £370,632 £386,200 £399,775
  • Degressivity  ‘Degressivity’ instead of Capping – obligatory  5% above €150,000  Based on Basic Payment element only (not greening)  Salary offset – not available in UK  Up to 2275 acres – no deduction  4000 acres – £4830 deducted CAP Reform Workshop
  • 2014 SPS Applications- Action  Entitlements in correct name  Calculate number of Entitlements – sell excess  Woods registered  Online preferred  Check Crop Coding – grassland and margins in ELS CAP Reform Workshop
  • Summary  Basic Payments less  Greening – Final details to be confirmed  Simplification?  Mapping features – changes online – one set maps  Farm cropping/policy needs review – opt out/rent in CAP Reform Workshop