As the new Basic Payment Scheme (BPS) looms in to site on 1st January 2015, changes are already afoot with farmers having to make sure this autumn’s planting of arable crops will be compliant with the new Greening measures.
However, another date is also looming that may be of significance for some, which is the deadline for transferring single payment entitlements. This is of importance for several reasons.
First, if one is wanting to transfer entitlements under the new scheme, there are likely to be delays before the transfer is confirmed which may cause unnecessary hassle when completing next year’s forms for the first time. Therefore getting the entitlements transferred under the old scheme will mean they are automatically transferred to BPS entitlements ready for immediate use next year which may make life easier.
Second, and perhaps of more importance for some, the person acquiring the entitlements under the new scheme rules will have to qualify as an “active farmer”, the precise meaning of which is still not entirely clear. This may be of significance for organisations such as wildlife trusts or landowners who may have purchased land but who do not necessarily farm in a traditional sense.
To avoid any concern regarding the interpretation of these new rules, individuals or organisations who think they may be affected by the active farmer test should seriously consider acquiring entitlements prior to the 21st October deadline.
This is not likely to affect very many people or organisations but it could catch some people out who have up until now have been able to make legitimate claims under the existing Single Payment Scheme but this may not be quite so straightforward under the new scheme. Also, farmers who may sell land to such people will have to ensure that the recipient of the entitlements is eligible to receive them otherwise this may upset some land transactions.
No doubt there will be ways of manoeuvring around these rules to achieve the desired result, whether that be through some form of contracting farming arrangement or the like, but if one is looking for a simple life, now may be the time to think about transferring entitlements so as not to get tied up in unnecessary complications or delays in receiving BPS entitlements next year.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
A property blog written and authored by our specialist blogging team, discussing all and any matter relating to the residential, rural and commercial property markets.
Showing posts with label rural land agency. Show all posts
Showing posts with label rural land agency. Show all posts
Tuesday, 23 September 2014
Monday, 18 August 2014
What to do with farm workers accommodation
In recent times I have come across clients with an increasing number of enquiries regarding farm worker’s accommodation. It has often been traditional to provide a farm worker with a “tied” cottage as part of his/her employment package.
However, farmers need to take care to ensure they do not create security of tenure should the farm worker no longer be required and recently concerns have also arisen regarding potential tax liability if the rent paid is significantly below the “market” rent, which could result in sizeable back dated tax bill if the cottage is regarded as a “taxable benefit”.
In relation to the security of tenure issue I would advise farmers to offer new farm workers an assured shorthold tenancy (AST). This means the lease can be brought to an end on two months’ notice from the Landlord and one month’s notice from the tenant after an initial fixed term of usually 6 to 12 months. But care must be taken at the start of the lease to ensure that an assured agricultural occupancy is not created which can have serious implications from the landlord’s perspective.
Unlike a normal residential letting, where the default tenancy is an AST, in the case of a farm worker a notice needs to be served on the worker before occupation of the property is taken, specifically notifying the tenant that the tenancy will be an AST. This is important because if this notice is not served the Tenant will have and assured agricultural occupancy and vacant possession of the cottage will be difficult to obtain, even if the farm worker no longer works on the farm.
In addition farm workers, even if granted an AST, are often allowed to occupy the property at a low rent but to be an AST the rent cannot be lower than £250/year (approx £21/month). However, it appears that HMRC may be looking at tightening their rules on whether or not such an arrangement may be considered as a taxable benefit because clearly a rent of £250/year is far less than the market rent which may well be in the order of £600/month or more.
In order avoid the HMRC challenging whether or not such an arrangement is considered a taxable benefit, it is suggested the Landlord/employer reviews the farm worker’s contract to make sure the job description accurately and clearly demonstrates the need for the accommodation. The important points are that the accommodation is provided for the farm worker so he/she can:
Thus, employment, tenancy and taxation law all appear to be intertwined when letting a cottage to a farm worker and care should be taken to ensure both Landlord and Tenant clearly understand the terms under which a property has been let so as to avoid costly disputes at a later stage.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
However, farmers need to take care to ensure they do not create security of tenure should the farm worker no longer be required and recently concerns have also arisen regarding potential tax liability if the rent paid is significantly below the “market” rent, which could result in sizeable back dated tax bill if the cottage is regarded as a “taxable benefit”.
In relation to the security of tenure issue I would advise farmers to offer new farm workers an assured shorthold tenancy (AST). This means the lease can be brought to an end on two months’ notice from the Landlord and one month’s notice from the tenant after an initial fixed term of usually 6 to 12 months. But care must be taken at the start of the lease to ensure that an assured agricultural occupancy is not created which can have serious implications from the landlord’s perspective.
Unlike a normal residential letting, where the default tenancy is an AST, in the case of a farm worker a notice needs to be served on the worker before occupation of the property is taken, specifically notifying the tenant that the tenancy will be an AST. This is important because if this notice is not served the Tenant will have and assured agricultural occupancy and vacant possession of the cottage will be difficult to obtain, even if the farm worker no longer works on the farm.
In addition farm workers, even if granted an AST, are often allowed to occupy the property at a low rent but to be an AST the rent cannot be lower than £250/year (approx £21/month). However, it appears that HMRC may be looking at tightening their rules on whether or not such an arrangement may be considered as a taxable benefit because clearly a rent of £250/year is far less than the market rent which may well be in the order of £600/month or more.
In order avoid the HMRC challenging whether or not such an arrangement is considered a taxable benefit, it is suggested the Landlord/employer reviews the farm worker’s contract to make sure the job description accurately and clearly demonstrates the need for the accommodation. The important points are that the accommodation is provided for the farm worker so he/she can:
- live on-site to protect buildings, people or assets or
- because the worker is regularly required to work particularly long working hours or
- because the accommodation is required because of regulatory requirements
Thus, employment, tenancy and taxation law all appear to be intertwined when letting a cottage to a farm worker and care should be taken to ensure both Landlord and Tenant clearly understand the terms under which a property has been let so as to avoid costly disputes at a later stage.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Wednesday, 11 June 2014
Market trends for the price of farm commodities
Looking at market trends for the price of farm commodities when compared to a year ago does not make for particularly happy reading. The Farmers Weekly magazine publishes these figures each week and when compared to the prices achieved a year ago most commodities are significantly down.
I have written about beef prices before which have fallen sharply. The price quoted in the Farmers Weekly for last week was 345p per Kg deadweight which is down 50p per Kg on the price achieved this time last year although in this area I am reliably informed that one would struggle to achieve 325p per kg in this area. This indicates that the price being achieved for beef across the country varies significantly and we do not seem to be well placed in this area to achieve the highest prices.
These low prices have stimulated the Farmers For Action (FFA) group to launch protests at meat processing plants in the Midlands where there is concern about the amount of Polish beef being imported and processed in this country.
However, it is not only beef which has seen prices fall in the last year. Arable crops have also dropped sharply in value with Winter Wheat down from £180/tonne to £147/tonne and oilseed rape down from £380/tonne to £268/tonne. At today’s prices, profit margins for arable farmers are likely to be squeezed hard although on the reverse side of this particular coin, this should mean the cost of cereal based feed stuffs for livestock will fall.
In contrast lamb prices have remained steady while milk prices are well ahead of those being achieved this time last year but the trend in milk price is now distinctly downwards as the industry is hit by a number of milk purchasers cutting their farmgate milk prices.
For example, Dairy Crest has cut its liquid milk price by 1.25p/litre from July and Arla has dropped it direct-supplier price by 1.5p/litre. Similarly, earlier last week First Milk reduced its manufacturing contract price by 1.15p/litre.
All these price cuts have come on the back of falling world dairy commodity prices where Fonterra’s Global Trade Auction saw prices fall by 4.2% on 3rd June which is the eighth drop in a row for these auctions. Having said that, cheddar cheese prices rose by 8% and skimmed milk powder by 2.1% and so although milk prices are falling sharply at present there is hope they will stabilise and not fall to the desperately low prices which were witnessed two years ago which forced farmers to take direct action, blockading milk processing plants across the country including here in Somerset.
So what can we read in to all these “tea leaves” – well probably not a great deal other than the fact that markets do go up and down and farmers are exposed to the vaguaries of world markets now more than they have been at any time since the end of the Second World War. Therefore in order to survive, successful farmers will always need to keep their costs under control so as to make money in the good times and survive the hard times because market volatility is most definitely here to stay.
I have written about beef prices before which have fallen sharply. The price quoted in the Farmers Weekly for last week was 345p per Kg deadweight which is down 50p per Kg on the price achieved this time last year although in this area I am reliably informed that one would struggle to achieve 325p per kg in this area. This indicates that the price being achieved for beef across the country varies significantly and we do not seem to be well placed in this area to achieve the highest prices.
These low prices have stimulated the Farmers For Action (FFA) group to launch protests at meat processing plants in the Midlands where there is concern about the amount of Polish beef being imported and processed in this country.
However, it is not only beef which has seen prices fall in the last year. Arable crops have also dropped sharply in value with Winter Wheat down from £180/tonne to £147/tonne and oilseed rape down from £380/tonne to £268/tonne. At today’s prices, profit margins for arable farmers are likely to be squeezed hard although on the reverse side of this particular coin, this should mean the cost of cereal based feed stuffs for livestock will fall.
In contrast lamb prices have remained steady while milk prices are well ahead of those being achieved this time last year but the trend in milk price is now distinctly downwards as the industry is hit by a number of milk purchasers cutting their farmgate milk prices.
For example, Dairy Crest has cut its liquid milk price by 1.25p/litre from July and Arla has dropped it direct-supplier price by 1.5p/litre. Similarly, earlier last week First Milk reduced its manufacturing contract price by 1.15p/litre.
All these price cuts have come on the back of falling world dairy commodity prices where Fonterra’s Global Trade Auction saw prices fall by 4.2% on 3rd June which is the eighth drop in a row for these auctions. Having said that, cheddar cheese prices rose by 8% and skimmed milk powder by 2.1% and so although milk prices are falling sharply at present there is hope they will stabilise and not fall to the desperately low prices which were witnessed two years ago which forced farmers to take direct action, blockading milk processing plants across the country including here in Somerset.
So what can we read in to all these “tea leaves” – well probably not a great deal other than the fact that markets do go up and down and farmers are exposed to the vaguaries of world markets now more than they have been at any time since the end of the Second World War. Therefore in order to survive, successful farmers will always need to keep their costs under control so as to make money in the good times and survive the hard times because market volatility is most definitely here to stay.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Tuesday, 28 January 2014
EU changes it's renewable energy targets
Last week the EU announced that it was going to change its renewable energy targets although at the time of writing the significance of this is as yet unclear.
At present the target is to cut emissions measured against those produced in 1990 by 20 % by 2020 and for 20% of energy consumption to come from renewable sources by that date. This policy has certainly had a major impact on the British countryside with wind turbines and solar PV “farms” springing up all over the place.
These projects have been driven by subsidies and it these subsidies which have been blamed by major electricity supply companies for pushing up our energy prices and this subject has clearly become a “hot political potato”.
But, if we believe climate change is important, there is little doubt that significant financial incentives will be required over a long period to encourage the huge investment which is required to shift our energy supply chain away from fossil fuel based technologies to low or zero greenhouse gas emitting sources of energy.
It is believed the EU’s change in policy will still involve setting targets on the reduction in greenhouse gas emissions but countries will be given freedom on how to achieve these targets. This will cause concern in some quarters because the viability of many renewable energy projects is dependent upon the receipt of subsidies and provided there is confidence that the subsidies will continue then so too will investment.
It is believed the new target will be a 40% reduction in 1990 greenhouse gas emissions by 2030 but each country can choose how to achieve this, whether that be through investing in renewables, nuclear or perhaps by burning gas rather than coal for instance. As you can see this could result in a shift in emphasis away from renewable energy technologies if the government so wishes. This could have a effect farmers and landowners, many of whom have looked at renewable energy projects as a significant additional source of income.
It is too early to tell what impact if any the recent EU announcement will have on our domestic energy policy but a lack of certainty going forward is a concern highlighted by Jonathan Scurlock, NFU chief advisor on renewable energy and climate change. He said, “The failure to send a clear message to the renewable energy supply chain makes some investors nervous.” He went on to comment that the government showed a “lack of enthusiasm” for renewables while showing encouragement of fracking.
Clearly fracking is yet another whole subject which could have an impact on our countryside on which we do not have space to comment here but on which there will no doubt be many more column inches written in the coming years.
Carter Jonas’ energy team can provide advice and comment on any Renewable Energy proposals and for any queries in the South West please contact Thomas Ireland in their Wells office on 01749 683386.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Monday, 20 January 2014
World Commodity Markets Are Strong
With farming becoming ever more reliant on world markets, farmers will be interested to learn that several organisations have reported that world commodity markets are strong and are expected to remain so for some years to come.
First, the United Nations Food and Agriculture Organisation (FAO) has recently published its latest monthly Food Price Index which showed that overall 2013 produced the third highest figure on record, almost equal to 2012 but about approaching 9% off the previous highest figure for 2011. The index is a measure of the monthly change in international prices of a basket of five food commodities, being cereals, sugar, oil, meat and dairy.
However, the total figure hides the fact that there was significant variation in the performance of the various commodities with dairy and meat reaching all time highs for the year while cereals were down by about 7% on the value for 2012 and oils index reached a four year low. These figures have been reflected in the fortunes of our farmers at home where dairy farmers in particular have seen milk prices rise sharply in the last year.
The second piece of encouraging news comes from the EU, where the Commission has published its annual report which attempts to model commodity prices in the medium term – in this instance over the next ten years. Such predictions have to be taken with a pinch of salt in that they are produced by computer generated models but even so the expectation is that commodity prices will remain firm.
But, it has to be remembered high prices do not always translate in to high profits and farmers must ensure they keep a careful eye on costs in particular because letting costs run away will eat in to profits. Further, there will always be price volatility and taking advantage of the highs and not getting caught out by the lows in commodity markets will be important. This is particularly relevant for arable farmers where crops can be stored and sold at different times of the year or even sold on “futures” markets while dairy farmers for example have to take whatever price is on offer at that time because liquid milk is perishable and cannot be stored.
Thus, compared to the lows of the late 1990s and early 2000s it seems farmers can look forward to the next few years with optimism but as we have seen in recent years, many external factors such as the weather can have a significant effect on an individual farmer’s fortunes. Therefore although the future looks reasonably bright no one can complacent and as ever it will the best run businesses which will thrive.
First, the United Nations Food and Agriculture Organisation (FAO) has recently published its latest monthly Food Price Index which showed that overall 2013 produced the third highest figure on record, almost equal to 2012 but about approaching 9% off the previous highest figure for 2011. The index is a measure of the monthly change in international prices of a basket of five food commodities, being cereals, sugar, oil, meat and dairy.
However, the total figure hides the fact that there was significant variation in the performance of the various commodities with dairy and meat reaching all time highs for the year while cereals were down by about 7% on the value for 2012 and oils index reached a four year low. These figures have been reflected in the fortunes of our farmers at home where dairy farmers in particular have seen milk prices rise sharply in the last year.
The second piece of encouraging news comes from the EU, where the Commission has published its annual report which attempts to model commodity prices in the medium term – in this instance over the next ten years. Such predictions have to be taken with a pinch of salt in that they are produced by computer generated models but even so the expectation is that commodity prices will remain firm.
But, it has to be remembered high prices do not always translate in to high profits and farmers must ensure they keep a careful eye on costs in particular because letting costs run away will eat in to profits. Further, there will always be price volatility and taking advantage of the highs and not getting caught out by the lows in commodity markets will be important. This is particularly relevant for arable farmers where crops can be stored and sold at different times of the year or even sold on “futures” markets while dairy farmers for example have to take whatever price is on offer at that time because liquid milk is perishable and cannot be stored.
Thus, compared to the lows of the late 1990s and early 2000s it seems farmers can look forward to the next few years with optimism but as we have seen in recent years, many external factors such as the weather can have a significant effect on an individual farmer’s fortunes. Therefore although the future looks reasonably bright no one can complacent and as ever it will the best run businesses which will thrive.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
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