Artificiality and the Single and Basic Payment Schemes

The High Court has had to consider whether a short-term arrangement, designed specifically to allow one farmer to claim the Single Payment on another’s farm, breached the Single Payment Scheme’s artificiality restrictions.

The case revolved around three 10-day farm business tenancies spanning 15 May in each of 2009, 2010 and 2011 (all three tenancies were entered into in 2009). The tenancies were all associated with a contract farming agreement. This required the landlord to perform the tenant’s management obligations under the tenancies, as well as to fulfil the cross-compliance requirements, both during the term of the tenancy and for the remainder of the year.

The Kings farmed in the east of the country. They had sold their land but were continuing to farm using a variety of short-term arrangements (none of which allowed them to claim the Single Payment) whilst looking for a replacement holding. The Kings entered into these arrangements with a tenant in the West Country who did not have entitlements and thus was farming “naked acres”.

On finding a farm to purchase in the Scottish borders, the Kings sought to sell most of their English entitlements.  The RPA decided the arrangements were artificial. It disallowed the transfer on the basis the entitlements were forfeit for non-use.  The Scottish Government, when asked to process a cross-border claim on some land south of the border in 2012, was inclined to a different view. However, it felt constrained to accept the RPA’s decision that the residual English entitlements were also forfeit.

The Kings sought a judicial review of the RPA’s conclusions and the High Court found in their favour.

The following issues are particularly interesting:-

  • Both sides accepted that the arrangements were artificial within the meaning of the Single Payment Scheme.
  • The issue was whether the arrangements were also “contrary to the objectives” of the Scheme.  The Court noted that there is no requirements for arrangements positively to further the objectives of the Scheme.
  • The RPA argued that the arrangements subverted the “use it or lose it rule”. It said that the Kings should have sold their entitlements to a farmer, who could then have activated them against another area of land, so that receipt of subsidy would reflect the farming of that land and the delivery of cross-compliance requirements.
  • The Court concluded this was not a case where someone, who in reality was not a farmer, had entered into arrangements which artificially established him as a farmer.  The Kings had been farmers, they continued throughout to be farmers, and they had good reasons for holding onto their entitlements whilst looking for a new holding.  The entitlements were generating subsidy for a (legitimate) farmer.
  • The combined effect of the tenancies and the contract farming agreements was to give the Kings control of the land, such that it was at their disposal for the purposes of the Single Payment Scheme on the critical date: 15 May. (Note that, from 2008 onwards, the 10-month rule had been removed from the Single Payment Scheme).
  • The effect of the arrangements was to ensure that the cross-compliance obligations applied to the tenanted land (for the whole of the Scheme year) when otherwise they would not have done. This effect satisfied another central plank of the Single Payment Scheme.
  • The RPA’s Appeal Panel had found that it was faced with two conflicting legal opinions: one from the RPA and another from the Kings. “Not being legally trained”, the Panel had felt obliged to accept the RPA’s opinion.  The Minister then found in favour of the RPA, taking into consideration the Panel’s recommendation.  This highlights a serious flaw in the appeals process, which becomes entirely circular in favour of the RPA/Defra in such circumstances.

This is a decision under the Single Payment Scheme, but very similar considerations will apply under the Basic Payment Scheme. The decision is useful in providing guidance as to where the boundaries lie between what is permissible and what is not, where farmers structure arrangements to facilitate receipt of the Basic Payment.

R. (on the application of T&S King (a partnership)) v. Secretary of State for Environment, Food and Rural Affairs [2016] EWHC 1692 (Admin)