DEFRA published their latest CAP Reform update on Friday, 19 December 2014. This provides more details about the Basic Payment Scheme (“BPS”) which starts on 1 January 2015. Amongst the information about qualifying as an active farmer, there are points that relate to agricultural tenancy agreements, contract farming agreements and share farming agreements.
First, there was concern that renting out agricultural land to third parties was a real estate service which would have meant that in some landowners’ cases, there might be concern that they did not immediately qualify as an active farmer. DEFRA has confirmed that this is not the case.
Secondly, there are details about how young farmers and new farmers can apply for new entitlements under the BPS. To do so, they will need to take a “certification form” to their solicitor or accountant. The form requires professional advisors to confirm that the claimant sole trader, person or company is in control or directs an agricultural business and property. Those professionals may have to check and confirm both financial and property aspects of control.
For land owned by an individual or a business, this can be shown by title deeds: a Title Information Document if registered land or title deeds if unregistered land. For a tenancy, this will be the tenancy agreement. Both landlord and tenant must remember this must be an actual tenancy agreement which confers a tenancy on the tenant and not a sham document. A grazing agreement is not a tenancy agreement as it does not give “exclusive possession” and that is very important from the perspective of the BPS rules.
Tenants will also need to remember that whilst the tenancy agreement may grant a tenancy to one person, that one person may actually put the land at the disposal of his or her fellow partners in a partnership, which claims entitlements under the BPS.
Generally, in relation to BPS, parties to contract farming agreements and share farming agreements must ensure that the contents of the agreements adhere to the requirements of the Basic Payment Scheme, as to who claims the entitlements and so is actually in occupation of the land.
Landlords and tenants should likewise ensure that the tenancy agreements properly provide for the new scheme and who is actually in occupation of the land.
January 2015 is a good time for an audit of arrangements of holdings or occupation of land by third parties, to coincide with the commencement of the BPS.