Further details of the lump sum exit scheme has been released. Further details are still to follow but the updated guidance does provide some clarity on the tax position;
Darren Mewse, agricultural partner, said “The government intends to introduce legislation to provide clarity that the Lump Sum Exit Scheme Payments will be treated as capital in nature and will be subject to capital gains tax. The existing capital gains reliefs will be available. The legislation will provide further clarity but we understand that the annual exemption of £12,300 per individual will be available and the worst case scenario will be the full amount taxed at a rate of 20% if you have made other capital gains in that year. Best case scenario is the amount after the annual exemption being taxed at a rate of 10% but we await the legislation.”
Further points that have been clarified in the publication;
- We expect you will be able to apply for a lump sum from April 2022 to the end of September 2022.
- Partnerships and limited companies are eligible and it does not affect future claims if any partners are also claiming as a different entity, i.e. a sole-trader.
- The BPS will remain open to new entrants.
- Land is to be transferred by May 2024.
- You can keep up to 5 hectares of land and if you own your farmhouse you can choose to keep it.
- The lump sum will be 2.35 times based on your average BPS claim for 2019,2020 and 2021 (including any young farmer payment or greening payment).
- You can request a forecast statement from February 2022 for the calculation from the RPA as to what your lump sum exit payment would be.
There is plenty to be considered if you feel now could be the time to pass the farm onto the next generation and further clarity is still sought when the detailed guidance is published prior to the application window opening.
In the meantime we would recommend if you are considering this option you request the forecast statement from the RPA and if you require any further details from us please make contact in your usual manner.