Bps and Buying Property

[Steevo]

Exactly, but if someone holds the entitlements for my land, how can they make claim?
They can't as they do not own said land, vso what / where does the value come from to make it appealing to another person.
I'm stumped here to get my head around this shenanigans..

Also, how can they retain said entitlements for the following year as they are not legally an owner of said land, do they lie?

The theory is they can claim if they have naked acres to attach them to....to be able to "activate" them.

I believe you retain entitlements for a number years and if not claimed on they fall back into the national reserve.

They could also sell them to another person who has naked acres.....a third party may pay £125/ha whereas you as incoming buyer may only be prepared to offer £100/ha for example. A land agent may have 3 buyers looking to purchase 50ha each.....or a larger farmer with a new block of land purchased from someone who had not registered it for entitlements wishing to top their claim up.

It appears you can also lease entitlements too if you wish.

 

[farmerm]

Exactly, but if someone holds the entitlements for my land, how can they make claim?
They can't as they do not own said land, vso what / where does the value come from to make it appealing to another person.
I'm stumped here to get my head around this shenanigans..

Also, how can they retain said entitlements for the following year as they are not legally an owner of said land, do they lie?

BPS entitlements and land are 2 separate entities. The seller can not make a claim whilst holding entitlements but no land. Someone with land but no entitlements can buy entitlements from someone with entitlements and no land, this is where the value arises, it is a game of musical chairs... I think you can carry unused entitlements though one claim year without activating them but loose them to the national reserve if they are not activated in the second year.

 

[Ukjay]

OK, so am I right in assuming not every acre of farm land is able to claim via rpa, thus is unable to claim BPS then, hence a trade in entitlements (if that makes sense) ?

 

[Steevo]

OK, so am I right in assuming not every acre of farm land is able to claim via rpa, thus is unable to claim BPS then, hence a trade in entitlements (if that makes sense) ?

Effectively yes. When they were "allocated" in 2004 they were only given to farmers who submitted an SPS/BPS claim.

This will answer most of your questions....

https://townsendcharteredsurveyors....2/UK-BPS-Entitlements-User-Guide-E-BOOK90.pdf

 

[Ewe2]

Entitlements are owned by the business claiming the BPS, they are not permanently attached to any block of land. The seller may well be purchasing another block of land, which he will move the entitlements onto. There is nothing stopping you going out to buy entitlements to go with the land you are purchasing. In Wales you could have bought entitlements for £50 per ha this Spring, which is likely to return a payment of £220 per ha for the first 54 hectares in December.

 

[Ukjay]

Effectively yes. When they were "allocated" in 2004 they were only given to farmers who submitted an SPS/BPS claim.

This will answer most of your questions....

https://townsendcharteredsurveyors....2/UK-BPS-Entitlements-User-Guide-E-BOOK90.pdf

Thank you. A little light reading ?

So in essence, a deficit of entitlements to land, creating more opportunities for vultures and gold diggers creaming in the trade of said entitlements.

Seems a shame the powers that be do not put a stop to this shite, and let things be as I assume was first intended.... If you have eligible land, then you make claim via the appropriate routes, which ceases when you sell the land, and not via some alternate cash generator scheme, but hey ho.

 

[tepapa]

I think you may have got the jist by now, but those entitlements owned by the seller don't belong to any particular piece of land and can be claimed anywhere in England, just that the owner had been claiming them on the piece your looking at.
You may have already owned some entitlements and wouldn't need to purchase any more to claim on the new land hense the option on the sale to buy with or without the entitlements.
A very corrupt system that should never have been set up but that's farming.

 

[chaffcutter]

As we did at the end of our FBT, we retained the entitlements because they have a monetarry value.
If we had taken over some other land which had no entitlements in with the tenancy or had bought it, we could use those entitlements to claim bps on that land. As we did not have any land to go with them, we sold them.
Can’t remember the exact figures offhand but roughly £15000 so nice to benefit from at the end of the tenancy!

I don’t see why it’s either being a vulture, or a corrupt system. It’s no different to trading milk quota, and that system ran for years bought and sold or leased.

 

[Ukjay]

As we did at the end of our FBT, we retained the entitlements because they have a monetarry value.
If we had taken over some other land which had no entitlements in with the tenancy or had bought it, we could use those entitlements to claim bps on that land. As we did not have any land to go with them, we sold them.
Can’t remember the exact figures offhand but roughly £15000 so nice to benefit from at the end of the tenancy!

I don’t see why it’s either being a vulture, or a corrupt system. It’s no different to trading milk quota, and that system ran for years bought and sold or leased.

If you didn't have to hold them due to the way the system has turned out, then the system would not be a money game as it now appears.

I could understand the possible need for this if said land depreciated by the impact value of not having the entitlements - but I see no evidence on that, thus the vultures are there to cash in, profitise on something that was as I am starting to understand it, not meant to be a money raising raffle for the highest bidders.

Also, go back to when this was set up - did the initial people pay for said entitlements?

 

[tepapa]

All part of the big scam. Back in 2004 (ish) any farmer in farming and claiming subsidy got given entitlements of different amounts depending on which country They were in and the countries own scheme. England pretty much went straight to area payments where as Wales and Scotland went more historical on what had previously been claimed in previous 3 years.
Those claiming in the reference years got given entitlements, for arguments sake £30,000 worth. If you happen to set up farming in 2005 you wouldn't have had a reference period so weren't entitled to free entitlements and had to purchase them yourself.
Not sure on the position in England but In Wales entitlements were trading at 3x the face value in some situations so some one given £30,000 of entitlements could have sold for £90,000 yet the farmer starting up in 2005 wasn't deemed to be a farmer and wasn't entitled to any for free so had to purchase at market price. There were some new entrant entitlements available to some, but not all.

 

[Ukjay]

All part of the big scam. Back in 2004 (ish) any farmer in farming and claiming subsidy got given entitlements of different amounts depending on which country They were in and the countries own scheme. England pretty much went straight to area payments where as Wales and Scotland went more historical on what had previously been claimed in previous 3 years.
Those claiming in the reference years got given entitlements, for arguments sake £30,000 worth. If you happen to set up farming in 2005 you wouldn't have had a reference period so weren't entitled to free entitlements and had to purchase them yourself.
Not sure on the position in England but In Wales entitlements were trading at 3x the face value in some situations so some one given £30,000 of entitlements could have sold for £90,000 yet the farmer starting up in 2005 wasn't deemed to be a farmer and wasn't entitled to any for free so had to purchase at market price. There were some new entrant entitlements available to some, but not all.

It does seem a shame that it has turned to be what looks like a money making scam to me for something that as I see it was intended to help farmers, but is now treated in this manner.
I too have seen written on some auction sites that they are still selling at over 3 times the value in some instances due to supply demand, but they did not advertise the prices (wonder why).

I only hope that this system gets stopped and they get reclaimed as soon as the holder has no land instead of a small % claimed back that I see noted, which should then send the vultures packing - and send a message to people who are dealing in this manner that the game is up (one can only hope)...

Will we never learn that stuff always comes back to bite hard somewhere eventually, but more worryingly maybe shows another reason how Jo Public get the impression farmers are super wealthy to be able to continue to pay such extortionate fees....

 

[yellow belly]

this all started with quotas which could be traded
then area payment that were only attached to the land and claimed each year
then single payment
and now bps
before that the price of farmed products was kept up by using intervention buying
and before the eu deficiency payments and grant aid for improvements

 

[PSQ]

Could the 'separate negotiation' just be a means to minimise stamp duty?
- Agent asks buyer to move some of the land value to entitlements (total stays the same), thus minimising the value upon which stamp duty (and capital gains tax?) is paid?

Mores the fool that pays top price for both the land and the BPS entitlements, it sounds like a typical land agents 'tiger trap'.

 

[7610 super q]

Welcome to the sham that is EU subsidies.
I saw an add from JJ Morris a few years ago for some entitlements valued at £5k each.
Nice little earner for some.

 

[Hampton]

They could trade them to others (as above approx £125/ha value).

They could also transfer them onto another parcel of land. Those entitlements are not permanently linked to those specific acres, but could be linked to other acres of land that don’t already have entitlements associated with them. Also known as naked acres.

But it’s £125/ha on land that is likely to be valued at 18-30k per ha. It seems petty to me not to include them and would be something I would insist on if I was buying land

 

[ISCO]

But it’s £125/ha on land that is likely to be valued at 18-30k per ha. It seems petty to me not to include them and would be something I would insist on if I was buying land

It's all a matter of bargaining strength. Agents think that as land is such a unique item that everyone will bid the same with or without entitlements then charge extra for entitlements.

 

[Ukjay]

But it’s £125/ha on land that is likely to be valued at 18-30k per ha. It seems petty to me not to include them and would be something I would insist on if I was buying land

That's is my point too. I'm buying a new property - house, barns stables etc, I do not feel it can be justified outside of the vultures and crooks realms to then claim that or tell you to feck off if they find a higher bidder.

 

[Ukjay]

It's all a matter of bargaining strength. Agents think that as land is such a unique item that everyone will bid the same with or without entitlements then charge extra for entitlements.

And as long as people do - the vultures continue to thrive and drive even more costs into things. But I suppose as long as some have payments coming in to cover the outlay then they will never see the irony.

 

[onthehoof]

Yes, but my last property (and I'm not talking only land here in this thread, it includes the house hence I find it strange) - the whole property came with the entitlements and no additional requirements put on me to buy them (not that we claimed mind).

So you had some entitlements in the past?
But I assume as you didn’t claim they have been lost to the national reserve??

 

[onthehoof]

IIRC each country in the EU could choose whether to go for a flat rate payment i.e. so many euros per hectare, a historic system based on an average of what subsidies had been claimed in the reference years of 2000/01/02 - this included arable aid, suckler cow premium, ewe premium, beef premium etc, or a hybrid system a mixture of the flat rate and historic.
England chose the hybrid system which was based on I think 90% historic and 10% flat rate in the first year gradually moving the other way, so following year was 80/20, 70/30 then 50/50 eventually moving to a fully flat rate.
I think Scotland and Wales were on the historic system.
one of the anomalies of the system was that the historic amount was fixed in those reference years so a business could claim that amount regardless of how many acres they now farmed so for example if they had a very high figure in those years from claiming all available subsidies but were now only farming a few acres they could stack the subsidy up on those few hectares and still claim the full amount for example a farmer claiming £50,000 sub average in 00/01/02 but now only farming 10 acres could claim the full £50k on those 10 hectares with the historic system i.e. £5,000/ha, he could then sell those entitlements with a value of £5k/hectare/year on the open market which may have been worth 3 or 4 times their value as the scheme was guaranteed for 7/8 years I think, so he could have sold them for £20,000/ ha
Obviously with the hybrid system this gradually diminished as it move year on year towards a flat rate but think it carried on in Scotland for longer.
Of course a depended on your business in the reference years and it worked both ways so a farmer who wasn't claiming sub in those years or started farming in 2003/04 would have no historic payment and so could claim nothing apart from the flat rate which was only 10% in England,, hence they set up the national reserve and later new entrant scheme.