ICAS seeks to provide greater certainty to farmers on single payment scheme

The revised rules of the Single Payment scheme agreed earlier this year by the EU Agriculture and Fisheries Council created considerable uncertainty as to when payments received by farmers (or claimants) under this scheme should be recognised and hence taxed.

To alleviate this uncertainty, The Institute of Chartered Accountants of Scotland and The Institute of Chartered Accountants in England and Wales have issued guidance as to when farmers should recognise such payments in their accounts.

Under the revised rules, farmers now only need to have eligible land at their disposal on one day (15 May) in each scheme year to 31 December; previously they had to hold eligible land for a 10-month period. However, land must still meet the conditions for eligibility throughout the entire calendar year.

This change raised the question as to when payments under the revised scheme should be recognised by claimants. The guidance makes it clear that professional judgment should be applied to the specific circumstances, whilst adhering to the overarching principle that the timing of recognition depends on having met the eligibility conditions.

Depending on the circumstances this might lead to:

(i) the payment being recognised on 15 May as this is the only day that the claimant has to hold the land and they should be aware of the likely future use of the land and hence its eligibility for the remainder of the calendar year; or

(ii) the payment not being recognised until 31 December of the year in question as the land must be eligible for the entire calendar year.

James Robertson, a former Convenor of the ICAS Taxation Committee and leader of recent discussions with HM Revenue & Customs on this topic, said:

"Claimants do not need to hold the land for the whole of the calendar year, but they remain responsible for ensuring that cross compliance requirements are met for the whole calendar year. This applies from 1 April 2008, even if the applicant is not in possession of the land for the entire year.

Ultimately, Chartered Accountants will need to exercise their professional judgment in this matter and determine whatever recognition policy they consider appropriate in the particular circumstances of the claimant, and then apply that on a consistent basis."

Earlier joint guidance dating from 2005 on accounting issues arising from the Single Payment Scheme has been withdrawn by The Institute of Chartered Accountants of Scotland (ICAS) and The Institute of Chartered Accountants in England Wales.