Liaison with the Valuation Office Agency and other offices: Single Payment Scheme (SPS)
The Single Payment Scheme (SPS) is the principal subsidy scheme within the EU and was brought in to replace most existing farm subsidies from 1 January 2005 and is based on the amount of land held. To claim SPS one must be a farmer undertaking enough agricultural activity to meet the cross compliance rules, hold SPS entitlements and have eligible agricultural land.
In England a hybrid payment system has been chosen, where the historic element of the payment dominated at first, but this is reduced and replaced by a flat rate area payment over an eight-year period. By 2012 the English payment will be on a 100% area basis.
The devolved administrations in Scotland, Wales and Northern Ireland chose a different payment basis, being based upon the farmer’s historic subsidy claims in the period 2000-2002.
The EU Common Agricultural Policy including the SPS is due to be reformed post 2013. It is considered likely that the SPS will continue, but with reduced payment levels. It is also expected the purely historic payment basis adopted in Scotland, Wales and Northern Ireland will be difficult to sustain, and an area based approach will instead be proposed in these countries.
Initially, farmers were allocated one unit of entitlement per hectare of land occupied.
Under the SPS, England is divided into three regions:
- Non-Severely Disadvantaged Area (SDA) - England outside the upland SDA
- SDA - English upland SDA other than moorland
- SDA Moorland - English moorland within the upland SDA
Land in a specific region can only be used to support entitlements and thus payment claims in that same region. Similarly only entitlements from the devolved countries can be used to make claims within those countries.
From January 2009 the former set-aside entitlements and special entitlements became normal entitlements.
Transfer of Entitlements
The Single Farm Payment entitlement is freely transferable, with and without land, in other words it can be sold. By contrast, leasing must be accompanied by an equivalent land transfer.
Entitlements can only be transferred to farmers (not pension funds and so on), and only within the same EU member state.
Entitlement values in England initially varied widely as the historic element is based on farmer’s past subsidy claims. Sale prices are generally compared on the basis of a multiplier of the yearly income generated by the entitlement.
Current analysis of land transactions shows that the absence of SPS payment entitlements from sales of farmland in England does not appear to generally make much difference to values. Up to 2010 the ready supply of separately available entitlements at low cost means purchasers could easily acquire the right to claim if the subsidy is absent.
There is no clear pattern evident in the land market regarding the treatment of entitlements when land and farms are sold. Entitlements are often included within the sale price, but where a previous tenant has registered them then the land may be sold without entitlements. There was some evidence during the initial years of the scheme that higher value entitlements were offered separately at an additional fixed price to the land. As the historic element in England diminishes in value this approach has declined, and most entitlements will be included within the land price, reflecting the fact their value is small in comparison to that of the land.
ALL Farming companies would be expected to have an entitlement to SPS and if farming a large area this aspect can have a significant value.
Should you wish to have an informal opinion of value or have a general query, you can contact the SAV Bloodstock Team.
If the matter is considered worthwhile, questions of value or the operation of the scheme should, if necessary, be referred to the Valuation Office Agency via the Initial Appraisal Unit (IAU) in Nottingham for advice.
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