DEFRA have now issued the consultation document regarding the lump sum payment for exiting agriculture. Having listened to the NFU webinar concerning this it seems to me that the lump sum, whilst being attractive from a cash flow perspective, has little else too recommend it. Clearly we have a lot more to learn and in particular will need to see the detailed rules when they are produced but the thrust of the consultation suggests that for multi-generational partnerships and companies the requirements to exit the industry is likely to apply to all participants and so preclude younger generations continuing to farm.
There are considerable uncertainties over the tax treatment of the lump sum although if this is taxed in the year of receipt, without any form of top-slicing for individuals, higher rate liabilities could arise. The cessation of farming will remove business property relief for inheritance tax purposes from the farm business assets and the opportunity to retain the farmhouse and a small area on ceasing farming suggests that the farmhouse in many cases will no longer qualify as such, thus losing agricultural property relief for inheritance tax purposes.
My first reaction is that the scheme may make a political statement but time scales and practicalities are likely to mitigate against it. Given that it is an accelerated payment of money which would otherwise be spread across the decoupled residual period of the basic payment scheme I think many people will find that the issues are greater than the attraction and take their money ‘on the drip’.