Europe: milk quota: compensation for cuts in quota: introduction
There have been a number of compensation payments made for both temporary and permanent reductions or cuts in milk quota. Two types of payment have been made in the UK:
EC REGULATION 775/87
- payments for the temporary suspension of a percentage of quota in 1987/88 and in 1988/89
EC REGULATION 1119/87
- payments for a permanent reduction in milk quota. The first of these took effect from 1 April 1987.
The option of whether to take the compensation for loss of profits or for withdrawal of quota is not available in respect of these payments. They are dealt with on normal lines with payments for temporary suspension being treated as trading receipts, see BIM55325, and payments for permanent reductions treated as capital receipts, see CG77920.
Compensation for permanent cuts in quota is normally payable in five or seven annual instalments. Such compensation is a capital sum and is chargeable to Capital Gains Tax. The precise treatment depends on when the cut was announced. The Rural Payments Agency can provide further information.