ENTITLEMENT REPORT

www.webbpaton.co.uk

www.entitlementtrading.co.uk

01793 842055

 LATEST NEWS

 

FIRST 2007 PAYMENTS HAVE BEEN SENT OUT BY THE RPA TO LUCKY FEW FARMERS.

 

THE RECENTLY ANNOUNCED CAP HEALTH CHECK IS PROPOSING THE FOLLOWING:

 

1.       TO SIMPLIFY SINGLE PAYMENTS SO THEY PAID ON A REGIONAL BASIS ONLY (THIS WOULD MEAN A MAJOR CHANGE TO THE  SYSTEM IN SCOTLAND AND WALES).

 

2.       TO INCREASE MODULATION ON CLAIMS IN THE FUTURE :

BETWEEN     100,000 to 199,999 EUROS AT 10%

BETWEEN     200,000 to 2,999,999 EUROS AT 25%

OVER          300,000 EUROS AT 45%

          STEPS WILL BE TAKEN TO PREVENT FARMERS FROM TRYING TO CIRCUMNAVIATE THESE CUTS BY SPLITTING THEIR BUSINESSES ARTIFICIALLY.

 

3.       MAKE SURE THE PAYMENT IS PAID TO REAL FARMERS BY SETTING A HIGHER MINIMUM HECTARE AND A MINIMUM PAYMENT.

 

4.       A “SOFT LANDING” FOR MILK QUOTAS.

 

5.       SIMPLIFY CROSS COMPLIANCE.

 

6.       TO LOOK AT RENEWABLE ENERGY, ENVIRONMENT CHANGES AND WATER MANAGEMENT.

 

7.       A RELOOK AT THE FUNDING OF PILLAR 2.

 

The good news is the French take over the EU Presidency on 1^st January 2008 so they should look after the EU farmers’ corner on our behalf.  The Cap Health Check is due to be finalised at the end of December 2008.

 

2008 ENTITLEMENT TRADING HAS OPENED AND IS ALREADY BUSIER THAN THE SAME TIME LAST YEAR.

See the Entitlement Trading section of our website for more details or ring George Paton on (01793) 842055.

 

ENTITLEMENT TRADING OPPORTUNITIES

1.                 SELLING ENTITLEMENT.

Do not be left with Entitlement Hectares you cannot unlock if you are a farmer who has sold land or lost rented land or retired.  Sell it to produce a return.

 

2.                 BUYING ENTITLEMENT.

If you have bought land or rented land without Entitlements or with very low value Entitlements consider whether it makes financial sense to purchase Entitlement in order that you receive a per hectare Single Payment.

 

1.                 “LEASING ENTITLEMENT”. BY WAY OF A BACK TO BACK WITHOUT LAND SALE The rules state that leasing of Entitlement can only be done with land.  However it is possible to sell the Entitlement without land from Farmer A to Farmer B for the 2006 Entitlement Trading year.  At the same time as setting up this deal the paperwork is completed to transfer the Entitlement back as a sale without land from Farmer B to Farmer A for the 2007 Entitlement Trading year.  It is expected that such Back to Back Sales will trade for 50% of the value of the yearly amount per hectare payment value of the Entitlement.

 

2.                 EXCHANGING POOR VALUE ENTITLEMENT FOR HIGH VALUE ENTITLEMENT.

This is where a farmer sells his low value Entitlement and buys higher value Entitlement.

 

3.                 CEASING TO HAVE TO SET-ASIDE LAND.

This is where a farmer pays another farm to buy his Set-aside Entitlement.  Care should be taken that the transfer is not artificially created and against Article 29 of the EU Regulations.  It should be noted that when Set-aside is held a farmer must first Set-aside the number of hectares of Set-aside Entitlement he holds before he can claim on his Normal Entitlement.  This is still the case even with the EU allowing crops to be grown on the Set-aside land.

 

4.                 SURRENDERING LOW VALUE NORMAL ENTITLEMENTS TO THE NATIONAL RESERVE

This creates “naked hectares” in order to unlock Entitlement hectares so a farmer can claim on Entitlement purchased in.

 

5.                 NOT CLAIMING ON LOW VALUE ENTITLEMENT TO CREATE “NAKED HECTARES”

This is where a farmer does not make a claim on his low value Normal Entitlement hectares in order that he can purchase some of a higher value.  He can hold the lower value Entitlement for three years before he needs to surrender it to the National Reserve or sell it.

 

8.         INVESTING IN ENTITLEMENT TO OBTAIN A HIGH RETURN ON THE CAPITAL INVESTED.

This is a simple investment decision where a farmer is looking at the percentage annual return on the value of Entitlement he purchases.  Returns typically will be above interest rates offered by Building Societies

                 9.       ALLOW SOMEONE ELSE TO BUY A HIGHER LEVEL ENTITLEMENT FOR YOU

We have investor who will buy you a higher value entitlement in your name in return for a annual rent based on a percentage of the payment.

 

LEARN ABOUT ENTITLEMENT TRADING

 

Can trade:

            Normal Entitlements.

            Set-aside Entitlements.

         

N.B. Traded in hectares which can be split into any sized parcel.

•         

BASICS

 

1.      Deadline2^nd April 2008 to submit transfer document (RLE1) to the Rural Payment Agency, Scottish Executive, Welsh Assembly or DARNI for 2008 use.

2.      In future years 12 month trading with a 2^nd April deadline.

3.      Cannot stack i.e. payment value cannot be altered.

4.      Need naked acres to unlock the payment.

5.      Naked acres can be created by selling or surrendering Entitlement if of a low value.

6.      Set-aside Entitlement must be used first.

7.      Transferees and Transferors must have a SBI (Single Business Identifier) and be a Farmer.

 

HOW ENTITLEMENTS CAN BE TRANSFERRED

 

·         Sold With Land

·         Sold Without Land

·         Leased with Land

·         Annually Sold using a back to back Sale Without Land

 

TENANCY PROBLEMS – BE AWARE

 

1. If a Farm Business Tenancy runs for more than two years and Entitlement is being transferred by lease for the length of the term being specified on the FBT, the RPA will transfer back the Entitlement to the Landlord on the last date of the FBT, even though the Tenancy will continue to run on a year to year basis.

E.g. Land is let on a FBT for three years starting on 1st December 2007 and running to 1st December 2010.  No 12 month notice is served by the Landlord or the Tenant therefore the FBT continues yet the RPA will transfer back to the Landlord the Entitlement on 1st December 2010.

2. What happens if the Landlord is not a farmer at the end of the FBT?

3. Some newer Farm Business Tenancies do not allow the farmer to sell the Entitlement on the open market, check your FBT before instructing a broker to sell your Entitlement.

3.      Older tenancies clearly do not address Entitlement.  The EU clearly allocates Entitlement to farmers.  At the end of such tenancy this belongs to the Tenant farmers or their beneficiaries to sell.

4.      National Reserve and transferring Entitlement back to a Landlord.  Can you do it without penalty?

 

WHEN TAKING ON FARM BUSINESS TENANCY LAND

 

·         Entitlement must be transferred when the FBT is started.

·         Always ask for the value of the Entitlement being transferred with the land.

·         How many hectares of Set-aside Entitlement are included?

·         Ask for proof that this is correct.

·         Check that none of it was allocated out of the National Reserve.

·         Assess whether the landlord can transfer the Entitlement to you? i.e. is he a farmer?

·         Pay the appropriate rent with regard to the Entitlement value.

·         If you do not like the value of the Entitlement you do not need to take the Entitlement.  Tell the Landlord to sell the Entitlement in the open market and purchase a better value Entitlement in the open market.

·         If there is no Entitlement attached with the FBT do not assume that you can use the land to unlock transferred in Entitlement.  The Landlord may be attempting to make a claim without your knowledge.

 

WHAT WILL WEBBPATON DO?

 

1.     Check the Entitlement values are correct and can be transferred.

2.     Will sell Entitlement without land with a contract which protects the parties.  This Contract will protect the purchaser if there is a problem due to the information they have provided.

3.     Will handle the collection of the money.

4.     Without the money the deal will simply not go to the Rural Payment Agency.

5.     Will hold the money in a R.I.C.S. client account until the deal has been confirmed by the Rural Payment Agency.

6.     If there is a problem with the transfer the money will be returned plus compensation for losses.

7.     Use specialist software to handle a large number of deals.

8.     Office and farm based trading.

9.     Online trading.  www.webbpaton.co.uk

10. A specialist Single Payment team to answer buyers and sellers’ questions.

 

INFORMATION

  

George Paton, Mark Webb and Kathy Hancock have built up an in depth knowledge of the Single Payments.  As well as trading Entitlements they will continue to advise Farmers and other Professionals on Single Payment matters.  As many of you know WebbPaton is one the trader of one of the biggest volumes of Milk Quota and has become very specialised in this field of professional work, having traded it since 1984.   WebbPaton will endeavour to use their specialist knowledge and bespoken software programs to trade Entitlements.

 

Mark and George at WebbPaton have prepared two very informative Seminar on Single Payment Entitlement Trading and how it will affect the farmer.   If you are looking for a speaker or are organising a seminar / meeting please telephone George Paton on (01793) 842055 to discuss further.