The ticking clock : CAP reform 2014
Posted by Susan Hart on 21st November 2011
On 12 October 2011, the draft proposals relating to the reform of the Common Agricultural Policy (CAP) were officially published. The last major reforms to the CAP were called the Mid-Term Review and were introduced from 1 January 2005 – but the legal starting point for the reforms was late January 2003, when the draft proposals were first published.
Mid-Term Review
The Mid-Term Review heralded one of the most fundamental changes to the grant support for farmers in recent years. It decoupled support payments from production. Those who failed to take appropriate action - or decided that they could delay taking any action until the actual legislation was finally published - were caught out. The same applies now. No-one can afford to ignore the fact that these draft proposals were published on 12 October 2011.
CAP Reform 2014
The fundamental factor underpinning the reform is that on 31 December 2013 all current entitlements will cease and disappear. The new entitlements (and thus the ability to claim basic payments) will be issued to those making the returns on 15 May 2014, provided those persons are, for larger holdings, “active farmers” and they activated at least one entitlement in 2011.
Uncertainty and artificiality
From 2003 until entitlements were established in 2005, there was a period of great uncertainty. Fewer sales or leases were entered into, as there could be no guarantee that the outcome intended by the parties (as far as entitlements were concerned) could be properly documented. There were provisions in the 2003 draft legislation stating that “artificial transactions” entered into after January 2003 designed to unfairly take advantage of the new proposals would be of no effect. The same applies to these new draft proposals: artificial transactions entered into after 12 October 2011 designed to avoid the effect of the new CAP reforms will not be effective.
Active farmer
The definition of “active farmer” is a cause of concern: as it links “activeness” to the percentage of monies received from farming activities. Thus, it could exclude those who realise substantial sums on the sale of their redundant buildings for development or even those who have decided to add value to their holding by processing the produce on the farm and then selling it on. Whereas those people who historically have claimed, for example, on very small pony paddocks will not have to prove that they are active farmers.
Cap on payments
There are proposals to cap larger payments. This will, where historically there has been an amalgamation of holdings in order to create a more economic unit, tempt individuals to demerge. However, such temptations should be resisted, unless it is clear that the demerger is not one of the “artificial” arrangements prohibited by the draft legislation.
Do not delay
It is beyond the scope of this short article to go into the new CAP proposals in the detail that they deserve. However, if you are about to do any one of the following, please do take professional advice on what needs to be done to preserve your position; do not think that action can wait until the legislation is finally enacted:
- granting a tenancy
- purchasing land
- renewing your entry level stewardship scheme
- retiring from a partnership or taking in a new partner
- granting a mortgage where the lender wishes to take security over the entitlements
