Category: Policy & Business

Energy Efficiency

From the 1st April non-domestic premises being let out must comply with energy efficiency standards.  This applies to England and Wales where all properties must be rated grade E or better.  Those that are rated F or G are deemed to be ‘substandard’ and it will be illegal to let them until improvements are made.  It covers buildings that are not used for residential purposes that ‘use energy to condition the indoor environment’.  This rule will apply to lettings on farm such as offices or workshops.  Some of these are likely to have been let on long-standing or informal arrangements (especially workshops).  An EPC may never have been done or the landlord might be unaware of their obligations.   

Scottish Farm Incomes

Farm profits in Scotland have significantly increased for the second year running.  In the 2021/22 year, the average Farm Business Income (FBI), which can be thought of as farm profit, was £50,000 across all farm types; a rise of over £11,000 on the previous year.  This follows a £10,000 increase the year before.

The main cause for improvement is an improvement in total output.  This includes agricultural output, agricultural support payments and diversified activities, and was up by 9% on the year.  Agricultural output alone increased by 10% due to strong milk, cereal and livestock prices.  The profit for an average Dairy farm was estimated to be £162,100, with Cereal farms reaching a record high of £84,632.  The increase in output more than offset the increase in costs which were up by 6%.  However, with the figures only running to spring 2022, these costs do not not the reflect the cost rises seen over the last year.  For the first time in ten years, the average farm would have been profitable without support payments (BPS, LFASS etc).  The average business would have made a profit of £5,100 from agriculture, contracting and diversified activities.

The data is from the accounting year 2021-2022 – i.e. the period ending around a year ago which relates to the 2021 crop year and 2021 BPS.  The analysis is based on a survey of about 400 commercial farms (standard output exceeds £20,000).  It excludes farm types not in receipt of support payments (i.e pigs, poultry and horticulture).  Full details of the data, including a breakdown by farm type, can be seen at https://www.gov.scot/publications/scottish-farm-business-income-annual-estimates-2021-2022/

Local Nature Recovery

The Government has issued guidance on how Local Nature Recovery (LNR) strategies should be drawn up.  These akin to Local Plans under the Planning regime, but for nature.  They will set out priorities and opportunities for nature recovery in defined areas – usually a Local Authority region.  These strategies may have practical implications as elements of ELM such as Countryside Stewardship and Landscape Recovery will have local targeting.  They may also change the weighting of the Biodiversity metric under Biodiversity Net Gain.  Having land included in a LNR strategy with a certain land use places no obligation on landowners to use it in that way.  However, it may influence future opportunities.  The various environmental lobby groups are sure to be actively engaged in the LNR process.  The farming sector needs to ensure its voice is heard as well.  

Rules for Farmers

Defra is trying to make the ‘Rules for Farmers and Land Managers’ easier to find.  Following consultation and feedback from a group of farmers it has launched a new page which can be found at https://www.gov.uk/guidance/rules-for-farmers-and-land-managers.  It has links to all all the pages that contain information on the ‘must dos’ in law.  Defra is asking for feedback on how to improve the page further, this can be done via a link on the page.

Animal Health & Welfare Capital Grants

Defra has announced the Animal Health & Welfare Grants are now available to apply for.  These are being offered as part of the Farming Equipment and Technology Fund (FETF) and represent the next step on the Animal Health and Welfare Pathway.   Grants of between £1,000 and £25,000 are available towards the cost of items that have been pre-identified to improve the health and welfare of livestock and which also improve productivity together with bringing environmental benefits to the business.  A list of the items and the amount of grant available (circa 40%) can be found at https://www.gov.uk/government/publications/farming-equipment-and-technology-fund-fetf-2023/annex-4-fetf-2023-animal-health-and-welfare-eligible-items.  Regardless of the price an applicant pays for the item, they will receive the grant indicated on the list.

The list contains over 100 items, many of which are new for this round and have been included following co-design of the scheme.  In particular, support for broilers and egg layers is now available for the first time.  This round will be open for 12 weeks, closing midday on 15th June.  Animal Health and Welfare grants will be offered every year throughout the Agricultural Transition.  Information on further rounds will be made available in the summer.  Whether there is another round in 2023 will depend on uptake under this round.

The scheme is competitive and to be eligible for funding, equipment must not be purchased until an agreement has been received from Defra.  If successful, all items must be paid for and installed before a claim for grant is made, and ahead of the claim submission deadline which will be included on the agreement offer.  Applications can only be made via an online portal this can be found at https://ahw.fetf.org.uk/

Full guidance is available at https://www.gov.uk/government/publications/farming-equipment-and-technology-fund-fetf-2023/about-the-farming-equipment-and-technology-fund-fetf-2023

A reminder that the Productivity and Slurry theme of the Farming Equipment and Technology Fund closes midday on 4th April (see Bulletin article https://abcbooks.co.uk/productivity-slurry-grants/).

Budget 2023

The Chancellor, Jeremy Hunt, delivered what he described as a ‘Budget for Growth’ on the 15th March.  The main points are;

  • the Office of Budget Responsibility (OBR) predicts that the UK will (narrowly) avoid a recession in 2023.  This is defined as two successive quarters of negative growth.  However, the economy is still forecast to shrink by 0.2% during 2023.  In 2024 growth is forecast to rebound to 1.8%, with 2.5% in 2025 and 2.1% in 2026
  • inflation (CPI) is predicted by the OBR to fall to 2.9% by the end of this year
  • as previously set out in the November Budget, Personal Allowances and Higher Rate Thresholds for Income Tax will be frozen until 2028.  This increases tax income because, as wages rise, the tax-free element does not rise in tandem.  In addition, the top 45% Additional Rate of Income Tax will be paid on earnings over £125,140, instead of £150,000
  • one of the headline measures in the Budget was reform to tax relief on Pension contributions.  The annual tax-free allowance is raised from £40,000 to £60,000 and the Lifetime Allowance is completely scrapped.  This is designed to encourage older workers (especially doctors) to remain in the workforce
  • There were no changes to Inheritance or Capital Gains Tax, beyond that announced in November (the annual CGT exemption being cut to £6,000 from April)
  • It was confirmed that the main rate of Corporation Tax on profits over £250,000 will increase from 19% to 25%.
  • The ‘Super-deduction’ under which companies could claim 130% tax allowance for investment in certain assets will end in April.  A 100% first-year allowance (‘full expensing’) will replace it – this will have no expenditure limit.  The standard 100% Annual Investment Allowance (AIA) for sole traders, partnerships etc. will remain at £1m
  • The Household Energy Price Cap will be extended for a further three months to June, but at a lower subsidy rate so that the average bill is capped at £2,500 per year rather than £3,000.  There is no change to business energy support
  • Fuel duty is frozen.  The duties on alcohol will go up in line with inflation from August, but there will be a reduction in duty on beer and cider sold in pubs
  • There were a number of measures introduced to get more people into the workforce including additional free childcare and extra programmes to get the over-50s back to work
  • One specific point for agriculture was the launch of a consultation on the taxation of the ecosystems market (see https://www.gov.uk/government/consultations/taxation-of-environmental-land-management-and-ecosystem-service-markets).  This has two parts.  The first is a call for evidence on the taxation of ecosystems services.  The second part looks at APR under IHT and whether the rules need to be changed to encourage ecosystem services.  This part is also being used to consult on a recommendation in the recent Rock Review of tenancies that APR on tenanted land should be restricted to situations where leases are for 8 years or more. 

BPS 2023

The 2023 Basic Payment Scheme (BPS) application window is now open.  The last day to submit a claim (without penalty), including Young and New Farmer applications and to transfer entitlements is 15th May.  Certain changes can still be made, to a previously submitted claim, until 9th June as long as the claim has been submitted by 15th May.  Claims can also be made up until 9th June, but will attract penalties.  All scheme rules and details on how to claim can be found via https://www.gov.uk/government/publications/basic-payment-scheme-2023

The 2023 BPS application will be the last under the present system, it is also important that a claim is made this year.  From 2024 Defra plans to De-link payments and to be eligible for De-linked payments from 2024-2027 an eligible claim must have been made in 2023.  As previously written, De-linked payments are based on a business’s average BPS payment, including any Young Farmer Payment and Greening for the years 2020, 2021 and 2022 – the reference payment.  When payments are De-linked, entitlements will not be required and it will not make a difference if a claimant increases or decreases their land area or even stops farming, the reference payment will be made annually, subject to the % deductions under the Agricultural Transition, until 2027.

If a claimant has applied and received the Lump Sum Exit Scheme payment they will not receive a De-linked payment.  For those who have applied for the Lump Sum, but have not yet completed their exit it would be prudent to claim for the 2023 BPS, to safeguard their position in case they find they are not eligible for the Lump Sum or cannot complete the land transfer by 31st May 2024.  If a BPS claim is made in 2023 and they subsequently meet the Lump Sum rules, the 2023 Basic Payment will simply be taken off the payment due under the Lump Sum.

As was the case last year, the BPS payment will be made in two instalments.  An advanced payment of 50% of the estimated total will be paid from 1st August 2023 with balance payment made from 1st December.

The revenue claim window for Countryside Stewardship and Environmental Stewardship is also now open and closes on 15th May.

CS Capital Grants

Defra has lifted the grant limits for the Countryside Stewardship (CS) standalone Capital Grants scheme.  This means there are no limits on either the maximum amount for any application or the amount that can be applied for in each of the four groups (boundaries, trees & orchards; water quality; air quality; and natural flood management).  Previously, there was a limit of £20,000 per group (£80,000 total).  Going forward, Defra says each application will just be assessed for value for money.  The full (amended) guidance can be found at  https://www.gov.uk/government/publications/capital-grants-2023-countryside-stewardship/applicants-guide-capital-grants-2023

Windsor Framework Agreement

On 27th February, the UK Government and EU Commission reached an agreement on the implementation of the Northern Ireland (NI) Protocol – the ‘Windsor Framework’.  The deal emerged after months of, often arduous, negotiations and is heralded as a major breakthrough by both the UK and EU negotiators.  It is hoped that this framework will resolve the thorniest issue of the entire Brexit process and has been welcomed by most Northern Irish stakeholders, although the DUP have yet to give an official view on the Framework, which is not expected until April.

The key aspects of the agreement are:

  • Customs Procedures for Goods: there will be a ‘green lane’ for goods moving from Great Britain (GB) into NI which will be consumed in Northern Ireland and not deemed to be at risk of moving into the EU Single Market.  For such goods, nearly all customs procedures will be scrapped.  Goods deemed to be at risk of moving into the EU Single Market will be moved through a red lane, where EU border controls will apply.
  • Chilled Meats: products such as sausages which are sold in GB supermarkets will also be available in Northern Ireland, provided that they are shipped into Northern Ireland by trusted traders.  Chilled meats are usually prohibited from import into the EU Single Market or require arduous certification procedures (sometimes hundreds of certificates for a container with chilled meat and animal products for the retail sector).  This will now be replaced by a single document confirming that the goods will stay in Northern Ireland and are moved in line with the terms of the UK’s internal market scheme.  This is a significant concession from the EU.  It is also a sensible one on the basis that such products are for consumption in Northern Ireland and there is now real-time data on the movement of goods from GB to NI, giving the EU the visibility it needs to ensure that no fraudulent activity is taking place. Any physical or identity checks that do take place will be on a risk and intelligence-led basis, based on decisions by UK authorities.
  • Seed Potatoes, Plants and Trees: certain plant and crop products had been either prohibited from entry into NI from GB since January 2021, or required lengthy certification processes.  Such trade can now recommence under the provisions of the Windsor Framework.  This is seen as a big boost for the seed potato sector in particular.  However, seed potatoes will still be prohibited from being sold to the Republic of Ireland.
  • VAT and Excise Duties: the NI Protocol’s legal text has been amended so that the UK can set VAT and excise duties for the whole of the UK.  It means that the reforms to alcohol duties taking effect in the UK in the summer will now apply to NI, thus lowering the price of beer in NI pubs for instance.
  • Parcels and Online Shopping: no paperwork will be required for parcels moving from GB to NI.
  • Pet Travel: documentary requirements and associated treatments and inoculations that are usually required by the EU have been removed for travel between GB and NI.
  • Applicability of EU Law in Northern Ireland: has been reduced substantially (estimated by the NI Secretary to be 97%) and now only focuses on the ‘minimum necessary’ to avoid a hard border on the island of Ireland.  The EU notes that the European Court of Justice (ECJ) will still have a final say on Single Market issues.  However, it is envisaged that its role will be greatly reduced due to the provisions outlined above and also because of the data sharing, labelling and enforcement procedures within the Windsor Framework.  This will help to safeguard the Single Market whilst also giving opportunities to resolve differences without having to revert to the ECJ.
  • ‘Stormont Brake’: this new mechanism is designed to give the Northern Irish Assembly the opportunity to pull an emergency brake on EU legislative changes which would apply in Northern Ireland.  It is designed to address concerns, particularly amongst Unionists, on what they perceive to be a democratic deficit of the NI Protocol as agreed in 2020.

For the brake to activate, it would require cross-community support and would need a minimum of 30 Assembly MLAs from at least 2 parties to agree to its activation.  The EU stresses that this can only be activated in exceptional and emergency circumstances, where there is a significant impact specific to everyday life in Northern Ireland.  It is also planned to have greater consultation between the UK and the EU on new EU legislation so as to minimise instances of the Stormont Brake being activated.  Once triggered, the UK Government would notify the EU of its activation.  The rule in question would automatically be suspended from coming into effect.  It could only then be reapplied if the UK and EU jointly agree.  If the suspension remains, the EU reserves the right to respond with remedial action to protect its Single Market.  For the Stormont Brake to become an option, it requires a functioning NI Assembly and is seen as a bid to get the NI Executive back up and running.

Overall, the Windsor Framework strikes a pragmatic and careful balance between the concerns of the UK Government and Unionists who wish to ensure that Northern Ireland remains an integral part of the UK, and of the EU in ensuring that its Single Market is protected.  With hindsight, it was the sort of balance that should have been struck when the original Protocol was negotiated in late 2020, but which ended up being rushed and was negotiated without enough attention to the nuance needed for the unique circumstances of Northern Ireland.  Importantly, by giving NI unfettered access to both the UK Internal Market and the EU Single Market, the Windsor Framework gives Northern Ireland the potential for strong economic growth, not just in agri-food but across NI industry generally. Undoubtedly, the Protocol will need further refinements in the years ahead as will the UK-EU trading relationship more generally.  This is as it should be, as trading relationships between near neighbours are constantly fine-tuned.  The US-Canada relationship is a prime example of this.