Get ready for entitlement transfers
Farmers and landowners need to manage their entitlements to the new Single Farm Payment carefully to ensure they bring maximum benefit to their farming businesses. Tight deadlines in 2006 mean that planning of any transfers is vital, warns rural property consultants Fisher German. Care must also be taken when drawing up agreements to ensure entitlements are not lost.
"This spring, for the first time, it will be possible to transfer your entitlements," points out Fisher German rural property surveyor John Ikin. "Up until now farmers have not been able to make transfers because the entitlements have not been definitively established(1). This is now due to take place in February or March 2006.
"But they will need careful consideration, particularly where a change of occupation is anticipated due to a sale, end or start of tenancy, retirement or a restructuring of the farming business," says Mr Ikin.
Farmers and landowners should agree other details of any new tenancies before the entitlements are established, he points out. This will ensure they do not miss the deadlines. Professional advice should be sought to ensure the terms fit with the new arrangements.
Timescales need to be taken into account, he notes. The Rural Payments Agency (RPA), that is handling transfers, needs a minimum of six weeks notice before the intended transfer date. This means a final deadline of 2nd April, to meet the 15 May deadline for submission of 2006 SP5 forms, and 19th March, which is six weeks before 30th April to satisfy the ten month rule(2).
"But these are final deadlines – don't leave things to the last minute. This is especially important with these new transfers because there are a number of pitfalls to be wary of if making a full transfer or leasing entitlements," says Mr Ikin.
If leasing entitlements with land, any tenancy agreement needs to run for exactly the same period as the lease, requiring greater communication between landlord and tenant to ensure that all relevant agreements correspond with the appropriate dates, Mr Ikin advises. "A poorly-worded agreement or Farm Business Tenancy, could mean you miss deadlines, lose the ability to claim on the entitlements or possibly lose them altogether."
Losing an entitlement to the Single Payment, which is now the main source of subsidy income for all UK farms, can mean a serious and permanent loss of income for landowners. Land without entitlement may trade at a discount.
"The timescales are tight and the implications of getting it wrong can be very damaging," warns Mr Ikin. "At Fisher German we are already advising many of our clients on how they can best transfer or lease entitlements without putting their business at risk. Every farmer and landowner contemplating transferring entitlements should make it their New Year's resolution to find out exactly what the implications are for themselves."
