With the volume of entitlements traded so far this year down on last year we are expecting a surge in activity once the new handbook is published this week. The price for Non-SDA entitlements is currently £10 lower than this time last year even though we now know the current scheme will continue for a further two years (2013 & 2014), the current exchange rate has weakened (and at today’s rates would represent an extra £20 payment per unit), and there now is the chance of these entitlements being used to roll over into the new scheme in England rather than there being a re-allocation. Whilst cash flow is tight due to last year’s harvest and the weather ever since, which has held back trade, because of the incredibly good return on buying and claiming entitlements for two years we believe people are merely delaying the decision for cashflow reasons as long as possible.
Western Morning News – 27.02.13 – RPA claims of ‘artificiality’ over Naked Acre lettings
The Single Farm Payment market is squaring up for a frantic last minute rush as the 2013 Handbook has only been released this week together with the SP5 forms. We are therefore a week behind last year already, and combined with Easter, two weeks, so practically the deadline for entitlement trading is now only 4 weeks away. This rush is going to be exacerbated as this year, whilst Naked Acre letting can continue into May, a new arrangement called Hosting also now on offer must be completed by the 28th March. Hosting will allow tenants who cannot sublet to make use of their naked acres, including Welsh farmers in Glastir and the Organic Farming Conversion Scheme. We have been involved in two test cases where the RPA has challenged Naked Acre letting claiming the arrangements in question back in 2011 were artificial. In 2011 the EU suggested that one could not have “dual use” claims whereby for instance a tenant claimed Single Farm Payment and the landlord the Stewardship. The RPA, in order to allow this to continue, carried out a survey of dual use arrangements and stumbled across Naked Acre lettings in the process. Supposedly having unwittingly come across Naked Acre lettings it took nearly 12 months for the RPA to decide on their approach, having in the mean time stopped some 2011 Single Payments claiming “artificiality” at the beginning of 2012. They have had to pay farmers compensation for the delay. As a result of these test cases the RPA have now published in their new 2013 handbook a warning about the risk of artificiality if using Naked Acres in certain circumstances. To successfully claim artificiality under Article 30 there are two tests that must apply. Firstly were the arrangements solely for the purpose of claiming Single Payment and for no other reason whether commercial or non-commercial? And secondly were such arrangements contrary to the objectives of the scheme? The objective is, as we know, to provide extra income to “farmers”. With millions at stake in penalties from the EU auditor the RPA will always take a cautious approach but admit that the second of the tests is the most difficult for them to prove, especially if two “real farmers” are involved. At present the RPA’s position with Naked Acre Letting is that the payment of the subsidy is “too “indirect” but they are not prepared to be drawn any further on this, suggesting that no one can advise fully until there is a court case. Their prime objective however is to be able to show the EU auditor that they have procedures in place to monitor/police the Single Payment Scheme. In response to this situation we now are also offering a hosting arrangement as well as letting which addresses some of the RPA’s queries however these must be completed by the 28nd March. As always these types of arrangements need professional advice.