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28th July 2016

Single payment scheme and artificial arrangements

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High Court upheld rights to claim payment under Single Payment Scheme for short term disposals.

In a decision published this month, the High Court has upheld the right of a farmer to claim payment under the Single Payment Scheme when the land used to activate the entitlements is only at the disposal of the farmer for a short period of time. 

In the case of R (T&S King (a Partnership)) v  the Secretary of State for Environment, Food and Rural Affairs, the partners of T&S King sold their farm in England with a view to moving to Scotland. The farm in England was sold in 2007 and the partnership retained their single payment entitlements. The partners then spent 3 years looking for a new farm which they eventually bought in 2010. 

During the three year gap, the partners wanted to preserve the single payment entitlements. Therefore they entered into a series of short term Farm Business Tenancies with a landowner who held eligible agricultural land but no entitlements. The FBTs only lasted for ten days each year from the 10th to 20th May. The partners were also contract farmers under a contract farming agreement, and under that agreement they had to maintain the land in good agricultural and environmental condition (GAEC) throughout the year. 

Initially the RPA held that the partnership was not able to activate the entitlements during that three year period. Although the partners had eligible agricultural land at their disposal on the critical date of 15 May each year, the fact that they only had a tenancy for ten days each year was clearly artificial and only put in place in order to preserve the single payment entitlements. The RPA argued that Article 30 of Regulation (EC) 1782/2003 applied. This Article states that no payment is made to beneficiaries where it is established they artificially created the conditions required for obtaining such a payment with a view to obtaining an advantage contrary to the objectives of the support scheme. 

The matter was appealed to the Secretary of State who upheld the RPA’s view. The Secretary of State’s decision was judicially reviewed. 

The High Court held that whilst the ten day Farm Business Tenancies were clearly artificial, they were not created with a view to obtaining an advantage contrary to the objectives of the scheme. The partners were farmers when they sold their farm in 2007. They continued to farm land from 2007 to 2010, albeit under a contract farming arrangement. They then resumed farming on their own farm in 2010. Throughout the period of 2007 to 2010 they were keeping land in GAEC which is one of the objectives of the scheme. Accordingly, the claims during the period of 2007 to 2010 were upheld. This was vital because if the partners had been unable to claim during that period, the entitlements would have been confiscated.

The case is of interest in that it upheld the use of a short term tenancy and contract farming arrangement to preserve single payment entitlements under the SPS scheme. However care would have to be exercised before using a similar structure under the Basic Payment Scheme. The decision turned on the interpretation of the Regulation which implemented the Single Payment Scheme. The decision would not necessarily be the same under the Basic Payment Scheme. 

For more information please visit our Agriculture, Food & Rural Business page, or alternatively contact Gareth Williams by phoning 01604 463344 or click here to email Gareth.