Finally the news many have been waiting in anticipation for has arrived, details of who will qualify as an ‘active farmer’ under the Basic Payment Scheme from 2015. Overall it appears that smaller farmers and smallholders, farming about 20 hectares and below (down to five hectares) will, in the main, be eligible.
The first part of the test is for one to consider whether you are a farmer under the new rules. A ‘farmer’ is a person or business that carries out an agricultural activity, which means either producing, rearing or growing agricultural products. This activity can include harvesting, milking, breeding animals and keeping animals for farming purposes. Or it can also mean maintaining an agricultural area so that it is kept clear of dense scrub. This definition is broad, however it is not the farmer definition that is so important, one must be an ‘active farmer’ in order to be eligible.
Not all ‘farmers’ will automatically be considered an ‘active farmer’ solely because they carry out an agricultural activity or because they have a large farm or estate. ‘Farmers’ with a total claim in the previous year of under €5,000 (in 2014 this will probably equate to less than 20 hectares) will automatically qualify as an ‘active farmer’. For new claimants in this scenario the Rural Payments Agency (RPA) will multiply the number of eligible hectares of land the farmer declares in the year of the claim by the average payment rate in the previous year (SPS or BPS) to determine this aspect of the test. For larger holdings, effectively farms with over about 20 ‘eligible’ hectares, a ‘farmer’ will qualify as an ‘active farmer’ unless they operate any of the following non-agricultural activities: airports; railway services; waterworks; real estate services; permanent sport & recreational grounds.
Farmers operating any of these activities may still qualify as active farmers if they can confirm that they also carry out significant agricultural activity. It should also be noted that the active farmer rule applies only to the farming business making a subsidy claim, not any other businesses connected to it. The further test of significant agricultural activity, or ‘readmission criteria’, involves either being able to demonstrate that annual subsidy payments are at least 5% of the business’s total non-agricultural receipts in the latest financial year, or their total agricultural receipts are at least 15% of their total receipts in the latest financial year, or their principle business or company ‘objects’ include an agricultural activity. The former two tests are limited to an EU defined list that are considered agricultural activities (or not), however it is clear that receipts from contract farming, rented land and sporting activities (shooting, hunting & fishing) will not count towards one’s agricultural income when considering the ‘active farmer’ test. For further detail about the latter we must wait for DEFRA announcements later this year.
Equestrian operations will need careful consideration if they are ‘operated’ by the farming business. This will be particularly relevant for those with a manége which is not solely for personal use and includes a spectator stand or viewing cabin, as this may be considered a permanent structure for a sports/recreational ground. Although the buildings and stables of a livery or riding school will not fall into this definition, stables provided for the use of competitors will, if there are also grounds which meet the criteria. If this is the case the ‘farmer’ will need to demonstrate that they are an ‘active farmer’ by showing that they meet one of the three ‘readmission criteria’.
The latest guidance also mentions that where claimants have split their businesses, by setting up a separate company for example, as a direct result of these new rules, their claim will be rejected. This could lead to the loss of one’s entitlements in 2015 and therefore professional advice should be sought well in advance of the 15th May 2015 to fully consider one’s options moving forward. It will be interesting to see how this is applied in practice by the RPA, as there will surely be those who are setting up companies for other reasons in 2015 and as a result splitting their businesses.
