UK: Agricultural Bulletin - A Briefing For Farmers And Land Agents, Winter 2009/10 - A Good Year

Last Updated: 28 December 2009
Article by Susan Shaw

The PBR did not affect farmers and landowners in the way some thought it might.

The Chancellor announced his Pre-Budget Report (PBR) on 9 December. Focusing on the positives, farmers and landowners can breathe easily again; for a while, at least.

A wealth tax was rumoured, and although the inheritance tax (IHT) nil rate band for 2010/2011 now remains at the current level of £325,000, this is a minor irritation compared to the worry that IHT could be increased to 50% on £1m+ estates. More importantly, no changes to agricultural property relief or business property relief were made, and the capital gains tax (CGT) rate remains at 18%.

However, it would be dangerous to relax too much, and the key message must be to start planning now for the tax year ahead.

Other key points

  • The small companies corporation tax rate, which was to increase in 2010/2011 to 22%, will remain at this year's 21%. This is welcome, although there was unfortunately no help announced for businesses making short-term losses.
  • The real sting in this PBR was the unexpected additional increase to National Insurance. The extra 0.5% (now a full 1% from 6 April 2011) applies to both employees' and employers' contributions, therefore a total increase of 2% will apply to those drawing a salary from their own company.
  • The previously announced changes to furnished holiday lettings (FHLs) from 6 April 2010 have been confirmed. Anyone with an FHL should review opportunities under the existing rules prior to 6 April 2010, particularly if contemplating a sale. Think about extra services you can provide to change the service from lettings to a 'hotel service' to keep the activities as trading. " The PBR has increased a number of green measures, particularly in relation to offshore wind projects. There was a further £400m allocation to support business investment in low carbon initiatives and help households reduce energy costs.
  • VAT, will, as expected, return to 17.5% from 1 January 2010.

Smith & Williamson has produced a full commentary to the PBR. This is available on our website:


The five-year ELS agreements are due for renewal in 2010. We outline the key actions required.

In 2010, nearly 14,000 Entry Level Stewardship (ELS) agreements will come up for renewal. Natural England (NE) has a target of 70% of the Utilisable Agricultural Area (UAA) in England to be under an environmental agreement. The area currently in schemes is just under 66%. Therefore, just to keep levels where they are, never mind increase them to the target figure, a high proportion of those ELS agreement holders will need to resign. NE hopes to get a renewal rate of around 90%.

There is a question mark over whether this rate will be achieved. The ELS has changed since it was launched in 2005, when the agreements now ending were entered into. Significantly, the loss of management plans will make it more difficult for many businesses to reach the 30 points per hectare (Ha) total. Furthermore, for those considering renewing their agreement, the fact that the scheme has changed means that they will not be allowed to simply 'tick a box' to sign up for a further five years. They will have to complete a new application form and submit associated maps.

All existing agreement holders with an ELS agreement expiring in 2010 will be sent a letter (if they have not already) stating their agreement is due for renewal. A reply card and envelope will be included. The card will ask a number of questions – 'Do you wish to renew your ELS agreement?', 'Will you be renewing using ELS online?', 'Will an agent be handling your renewal?', and 'Has you landholding changed since 2005?'

In February 2010, application packs will be sent out together with new Environmental Stewardship handbooks (3rd edition). Those that indicate they will be using ELS online will be sent log-in details rather than the normal paper application forms. ELS online includes a measuring tool and automatically calculates points. For more information, e-mail

The application pack will also include the final claim form for the existing agreement. To prevent any gaps between agreements, both the claim and new application must be submitted to NE two months before the start of any new agreement.

Farmers in Wales and Scotland should be receiving their SP as we go to press, while the RPA expects to make 75% of their payments by 31 January 2010.

2009 SPS conversion rate and regional area payments

The European Central Bank's official exchange rate on 30 September is used to convert Single Payments (SP) from euros to sterling. This year's rate was fixed at €1 = 90.93p; a 15% increase on last year and the most favourable rate since the Single Payment Scheme (SPS) started in 2005. The table shows previous rates.

Most UK farmers will receive a larger SP this year, even though modulation increases slightly between 2008 and 2009.


Actual payments are currently being calculated in Scotland and Wales for 2009, with payments starting to be sent to farmers from December.

Due to the SP system in England, the Rural Payments Agency (RPA) has to calculate the regional average rates (RAP) from scratch each year. Table 2 shows the RAP for 2009 and previous years as a comparison. The regional rates in the final column are the Ha payments on former set-aside entitlements, or on any normal entitlements that don't have history within them.

For 2009, the historic element within entitlements drops to 40% of claimants' reference amounts rather than the 55% used last year. The 'reduction factors' for the 2009 scheme are published in table 3. You cannot simply apply a reduction factor of 0.7272727, (40/55) as the total historic element paid in all entitlements is capped at 40% of the regional ceiling.

Andersons, the Farm Business Consultants, have calculated the net payment for the 2009 SPS on a hectare of arable land* should be £242.04. (*assumes arable area payments were claimed on all years during the 2000 to 2002 reference period). This compares to a payment of £215.72 in 2008 – a sizeable improvement.

For those who farm within the livestock sector, or would like a more accurate view of their SP for 2009, these rates are used as follows.

  1. Take the 2008 entitlement value and subtract the 2008 regional element (i.e. €141.93 in the English lowland). This gives the historic element within the 2008 entitlement.
  2. Multiply the historic element from 2008 by the reduction factor outlined above to get the 2009 historic element.
  3. Add the 2009 regional rate (€190.47 in the lowland) to the 2009 historic element; this produces the 2009 normal entitlement value.
  4. To get the final sterling payment, it is then necessary to convert at €1 = £0.90930, and take off the 19% deduction for modulation.

To calculate the total SP value for 2009, remember to include any proteins or energy crop payments. There is a complication if there is an element of sugar compensation in the entitlements; we will not attempt to outline the calculation process here as it becomes very involved.

The RPA's payment targets are similar to last year, i.e. to make 75% of payments by 31 January, and 90% by 31 March 2010.

Minimum claim size and crop-supplement payments

From 2010, the minimum claim size eligible for the English SPS will be 1 Ha. Until now, the minimum claim size has been 0.3 Ha. The new size is a result of the Health Check, which allowed member states to limit the number of very small applications under the scheme.

The Welsh Assembly Government has also agreed a 1 Ha minimum, but Scotland has broken the consensus and gone for 3 Ha. This is to align it with the minimum Less Favoured Area Support Scheme (LFASS) claim size.

The Department for Environment, Food and Rural Affairs (Defra) has also announced the future of the protein crops supplement. This will continue at its present rate of €55.57 per Ha for the 2010 and 2011 scheme years. It will then disappear for 2012, with the money going into the pot for the flat rate payment. The Nuts area payment will be treated in the same way.


The 2009 year was the last for the energy crops supplement.


Most farm types realised an increase in FBI for the year to February 2009.

Defra has released its latest Farm Business Income (FBI) results. The figures run for the period March to February, covering the 2008 harvest and including the 2008 SP.

Average farm business income for all farm types increased marginally to £50,900 compared to £49,800 (in real terms at 2008/09 prices) in 2008, although this figure masks a large variation between the different farm types.

The table illustrates the average FBI by farm type. Just about all the different farm types realised an increase for the year ending February 2009. This is due to an increase in the SP through a more favourable exchange rate compared to the previous year and, although input costs were a lot higher, the better prices for most commodities, particularly in the beef, lamb and pig meat sectors more than offset these.

Specialist pig enterprises saw the biggest year-on-year increase, albeit from a very low base. Firmer livestock prices have meant grazing livestock farms, both in the LFA and in the lowland saw large percentage increases compared to a year earlier, although again these were from a relatively low base. Firmer milk and cattle prices resulted in better FBI for dairy farms, with output more than offsetting the increased feed and fertiliser costs.

Of those farms which are cropped, cereals farms saw a fall in FBI while general cropping farms experienced a year-on-year increase. Both enterprises had a significant increase in output as the abolition of setaside and increased prices realised from the previous harvest encouraged larger plantings. But considerable increases in machinery running costs and other variable costs more than offset the increases in output on cereal farms. Inputs on general cropping farms increased, but to a lesser extent resulting in an overall increase in FBI by 14% (in real terms at 2008/09 prices).

FBI figures are based on results from the Farm Business Survey. FBI represents the financial return to all unpaid labour (farmers and spouses, non-principle partners and their spouses and family workers); it is the same as net profit.


Key rule change to save millions for the sheep industry

New rules for the New Year – the EID rules come into force on the last day of the year.

On 31 December 2009, the new electronic identification (EID) rules for sheep come into force. Since the summer edition of the Agricultural Bulletin, the industry has managed to secure a key change to the rules. The change will allow electronic tags to be read at approved central recording points such as markets and abattoirs, instead of on-farm.

The rule change is expected to save the UK sheep industry £7m to £18m each year. The change will mean that where the number of animals is too large to allow manual reading, farmers will be able to have their electronic IDs read at a central recording point and the information sent back to them, instead of having their own readers.

Farmers will be required to electronically identify all sheep born after 31 December 2009. They will not have to electronically identify those that were born before 31 December that are already tagged. Furthermore, under the slaughter derogation, sheep that are intended for slaughter at less than 12 months of age do not need to be electronically identified; but this could potentially cause a lot of work.

Under the new rules, where a batch of sheep is moved off the holding, the flock register must record the number of animals from each original holding. However, if the lambs were bought as stores from a number of holdings this could prove difficult. Currently, producers only have to record the total number of animals in the batch. In this scenario each tag will have to be read; where large numbers are involved this would be very time consuming.

With the new rule allowing central reading points, Defra has consulted with stakeholders whether to introduce a single electronic 'slaughter' tag as a voluntary option, alleviating some of the burden described above. This would mean that when handling large numbers of sheep no manual reading of the tags would be required. An electronic slaughter tag would cost more than a normal tag but less than a full electronic identification tag. It will be up to farmers to decide which to use, depending on the market at which they are aiming their livestock. Some farmers may be reluctant to buy lambs without electronic tags due to the increased work.

A further benefit of central point recording will be realised from 1 January 2011. From this date, movement documents will need to contain individual identification for each sheep. Again, this would be very time consuming and mean that in the case of high numbers of sheep an on-farm electronic reader would be required, but with central point recording the individual numbers can be sent back so that the flock register can be updated.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.