Basic Payment Scheme (Scotland)

Subsidy payment to farmers in Scotland introduced as a result of the European Union 2003 Common Agricultural Policy (CAP) reforms. It replaced the former CAP production subsidy payments to farmers by a single payment system. Payments are linked to compliance with specified environmental and farm management conditions.

The actual amount to be paid is dependent on three factors:

  • Reference Amount – areas and/or animals which met all scheme conditions and were used for payments during the 2000 to 2002 reference period.
  • Reference Area Amount the area (number of hectares) claimed by the applicant (or the correct determined area-whichever is the lesser).
  • Number and Value of Payment Entitlements Amount – the value ("unit value") of entitlements is given as the reference amount divided by the reference area. The number of payment entitlements is equal to the average number of hectares farmed during the 2000 to 2002 reference period.

The actual amount paid is calculated by multiplying the number of payment entitlements by the unit value.

From 2014 the exchange rate for Single Farm Payments has been set as €1 = £0.7773.

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Before You Start

Formerly known as the Single Farm Payment (SFP) Scheme, the Basic Payment Scheme is co-funded by the Scottish Government and the European Agricultural Fund for Rural Development (EAFRD) and is the main EU subsidy available to farmers in Scotland. The SFP replaced all the existing arable and livestock subsidies at the start of 2005 due to Common Agricultural Policy (CAP) reform, and provides payments per eligible hectare for farmed arable and grazing land that is maintained according to Good Agricultural and Environmental Condition (GAEC) standards.

The Basic Payment Scheme is a result of reforms to the Common Agricultural Policy that will affect farmers and crofters from 2015. The need for reform came from three reasons:

  • so as to better address the challenges of:
    • food security
    • climate change and sustainable management of natural resources
    • looking after the countryside and keeping the rural economy alive
  • to help the farming sector become more competitive and to deal with the economic crisis and increasingly unstable farm-gate prices
  • to make the policy fairer, greener, more efficient and more effective and more understandable

In order to apply, applicants must first submit a claim for the number of eligible hectares they wish to enter into the scheme. Application is through the Integrated Administration Control System (IACS) with a separate claim form for the Single Farm Payment.

Eligible applicants must be:

  • Based in Scotland.
  • Have farmed during 2000, 2001 and/or 2002 (the reference period) – and continue to farm in the current year.
  • Have previously claimed subsidy during the reference period.
  • Involved in agricultural activity.

Agricultural activity is defined as the production, rearing or growing of agricultural products – including harvesting, milking, breeding animals and keeping animals for farming purposes, or maintaining land in good agricultural and environmental condition.

In order to establish payment entitlements, applicants must declare the number of eligible hectares of land they wish to enter into the scheme (one eligible hectare equates to one payment entitlement). Eligible land includes all arable land and forage area (but excludes land under permanent crops).

As a condition of the scheme, applicants are also required to adhere to environmental Cross Compliance conditions – Statutory Management Requirements (SMRs) and Good Agricultural and Environmental Conditions (GAEC). All land on the applicants holding must be kept in accordance to environmental conditions for the whole of the year.

Set Aside

Applicants who were main producers during the reference period (2000 to 2002) will have a provisional set-aside entitlement and will be required to set aside a hectare of land for each set-aside entitlement. Land eligible for set-aside is generally land that was in arable use at 15 May 2003 (excluding permanent pasture, permanent crops, forests or land used for non-agricultural activities). The number of set-aside entitlements is equal to the obligatory set-aside required for Arable Area Payment Scheme (AAPS) claims during the reference period (2000 to 2002) – which is 10% of total cereals and set-aside.

Land designated as set-aside may not be used for any agricultural or horticultural production during the set-aside period, which is given as 15 January to 31 August – although the following activity is eligible during the set-aside period:

  • Production of non-food crops.
  • After 15 July – preparing for sowing or sow an arable crop for harvest after 15 January of the next year, including ornamental bulbs, field-grown trees and shrubs, cane fruit and strawberries.

Restrictions

Ineligible land includes:

  • Land under permanent crops.
  • Forestry land.
  • Horticultural crops (incl. fruit, vegetables and potatoes other than starch potatoes).
  • Land used for non-agricultural activities.

Land ineligible for set-aside includes:

  • Permanent pasture.
  • Permanent crops.
  • Forest.
  • Land used for non-agricultural purposes.

What You Need To Know

Key Criteria

Farmers and crofters in Scotland are eligible for entitlements if they received payments under EC financed direct support schemes in any of the calendar years 2000, 2001, or 2002 (or other reference period in cases of force majeure).

An eligible "farmer" in the EU legislation includes all persons owning or leasing agricultural land and maintaining it according to the cross compliance conditions.

Other farmers, such as new entrants, may apply for entitlements from the National Reserve.

Match Funding

Match funding is not a requirement of this scheme.

Eligible Expenditure

BPS in Scotland covers all farms that have obtained entitlements and are subject to various requirements, including the 10-month rule, which will not apply during and beyond the 2008 scheme year (see 'Eligible land - the 10-month rule' ), and the cross compliance requirements. These are explained in the following sections.

Entitlements

Entitlement is the term for the rate of payment per eligible hectare under the SFPS.  The number of entitlements refers to the number of hectares used in the reference period of 2000 to 2002.

Under the historic reference period method of calculation used in Scotland, entitlements were calculated on an individual's track record under the former direct payment schemes in the reference period.  The value of individual entitlements is different for each farm business.

The type of entitlement varies:

  • normal entitlements - these were calculated and based on sheep, cattle and arable claims;
  • set-aside entitlements - these were based on the average number of hectares in compulsory set-aside;
  • dairy entitlements - these were based on the milk quota held and on eligibility for the former Dairy Premium and Additional Payment; and
  • special entitlements - those who were granted payments, but had no hectares during the reference period, and those whose entitlements would otherwise be EUR 5,000 or more per hectare.

Entitlements were established through the 2005 application process.  Entitlements not established in 2005 will be put in the National Reserve.  Entitlements must be used (ie a claim made) in at least one of the years 2005, 2006 and 2007, otherwise they will be withdrawn and added to the National Reserve.

How entitlements were calculated

There were three stages:

SEERAD calculated entitlements in three stages.  First, a reference amount was calculated then a reference area and finally the number and value of entitlements.

  1. Reference amount - The areas which led to payment and/or animals which met all scheme conditions during the reference period (2000-2002 schemes) were used to calculate this.
     
  2. Reference area - The area claimed or eligible area actually 'found', whichever is the lesser, was used to calculate this.
     
  3. Number and value of entitlements - The number of entitlements given equals the average hectares farmed during the reference period (2000-2002 scheme years).  The value of entitlements were determined by dividing the reference amount by the reference area.  All entitlements allocated to an individual farmer have the same value.

The values of entitlements may be subject to certain reductions.  These are:

  • a percentage reduction from each entitlement if the sum of individual entitlements exceeds the financial ceiling for Scotland;
  • a reduction of up to 3% from each entitlement to establish a National Reserve;
  • a reduction for modulation (a diversion of money to fund a range of rural development measures) - the intention is to increase the total modulation rate (EU and national) to at least 10% by the end of 2007; and
  • a reduction of up to 10% from the component of entitlements derived from beef subsidies during the reference period to finance the national envelope for the beef sector.

Set-aside entitlements

It has been announced that the set-aside rate for 2008 will be suspended and fixed at zero.  This decision has come following the uncertainty of this season's harvest due to disruptive weather, and the livestock sector's high prices.  The result of this decision will mean that farmers will be able to bring land back into use and give a much needed boost to grain production.  There is an expectation that it could permanently be removed as early as 2009 and definitely by 2012 at the latest.

Eligible land - the 10-month rule

The old rule, prior to 1 April 2008, required that applicants must have had eligible land at their disposal for 10 months.  This rule will no longer apply.  Instead, the claimant only needs to have the land at their disposal on 15 May of each scheme year.

The claimant will still be responsible for making sure that cross-compliance requirements are met for the whole calendar year, even if the claimant is not in occupation of the land for the entire year.

Therefore, even if the land is sold or leased after 15 May, the claimant must ensure that the new occupier maintains it in line with the cross-compliance requirements if they are to guarantee their single farm payment.

Land grazed by horses

The situation in Scotland with regard to horses grazing land is as follows:

  • Land grazed by horses is considered eligible for SFPS throughout Europe.
  • Entitlements to Single Farm Payments in Scotland depend on historic usage of the land.  This usage is necessarily livestock rearing or arable crop growing.  Land only used to graze horses in the historic reference period for entitlements will receive no entitlements under SFPS.  Stud farms and the like will, therefore, not be eligible to receive SFPS entitlements.
  • Businesses that are solely horse oriented will have no historic entitlements and so will not be eligible for Single Farm Payments in Scotland in 2005.  In time they may choose to acquire SFPS entitlements.
  • New entrants in 2005, applying to the National Reserve must have at least a proportion of their production in sectors that would have attracted subsidy during 2000-2002 (eg sheep, suckler cows and beef).

The approach to CAP reform in Scotland is different from that adopted in England, and details are available on the DEFRA website:

http://www.defra.gov.uk/foodfarm/policy/capreform/index.htm

In general terms, a synopsis of this information may assume that horse owners in Scotland will not receive SFPS entitlements under the historic approach adopted for the SFPS in Scotland.

But as horses are considered agricultural animals, any horse owner that acquires, or has acquired, entitlements will be able to use land on which they keep horses as hectarage to support a claim.  In England, horse owners will not qualify for any payment from the historic reference amount but will from the outset be able to declare land that will attract the land payment.  Both in Scotland and in England the land is still subject to the full requirements of the SFPS.

Cross compliance (Statutory Management Requirements and Good Agricultural and Environmental Condition)

Payment under the SFPS is conditional on meeting the cross compliance conditions.  Under cross compliance, farmers must continue to comply with the Statutory Management Requirements in force for public health, animal and plant health, environmental protection and animal welfare.  Farmers must also maintain their land in Good Agricultural and Environmental Condition (GAEC).

Statutory Management Requirements

The Statutory Management Requirements require compliance with a range of 18 European regulatory requirements covering the environment, food safety, animal and plant health and animal welfare.  These Statutory Management Requirements are a set of laws which are in force throughout the EU.

Good Agricultural and Environmental Condition (GAEC)

Council Regulation 1782/2003 requires the definition of Good Agricultural and Environmental Condition to be in accordance with the GAEC standards set out below:

Soil erosion

  • GAEC 1 Post-harvest management of land.
  • GAEC 2 Wind erosion.
  • GAEC 3 Soil capping.
  • GAEC 4 Erosion caused by livestock.
  • GAEC 5 Maintenance of functional field drainage systems.
  • GAEC 6 Muirburn Code.

Soil organic matter

  • GAEC 7 Arable crop rotation standards.
  • GAEC 8 Arable stubble management.

Soil structure

GAEC 9 Appropriate machinery use.

Minimum level of maintenance

  • GAEC 10 Undergrazing.
  • GAEC 11 Overgrazing.
  • GAEC 12 Ploughing pasture of a high environmental/archaeological value.
  • GAEC 13 Protection of rough grazings/semi-natural areas.
  • GAEC 14 Application of lime/fertiliser on rough grazings/semi-natural areas.
  • GAEC 15 Field boundaries.
  • GAEC 16 Non-productive landscape features.
  • GAEC 17 Historic features.
  • GAEC 18 Encroachment of unwanted vegetation.

Penalties

Regulation 1782/2003 provides for penalties for breaches of cross compliance to be proportionate to the severity, extent, permanence and repetition of the non-compliance.  In cases of negligence, it specifies that the percentage of reduction in the Single Farm Payment should not exceed 5% or (in cases of repeated non-compliance) 15%.  In cases of intentional non-compliance, it specifies that the percentage reduction shall not, in principle, be less than 20% of the Single Farm Payment and may go as far as total exclusion from the aid scheme for one or more calendar years.

Farm Advisory System (FAS)

The aim of this measure, a requirement of the CAP Reform, will be to make available to farmers and crofters, a source of advice on land and farm management.  The range of advice offered, at a minimum, covers the requirements to maintain land in good agricultural and environmental condition and respect regulations relating to public, animal and plant health, environmental protection and animal welfare.

National Envelope for the Beef Sector

There are options in the EC Regulation to retain 10% of payments under each of the relevant sectors to establish a national envelope (ie a ring-fence sum of money) to address the protection or enhancement of the environment or for improving the quality and marketing of agricultural products.

The Scottish Executive has decided to operate a National Envelope for the Beef Sector.  This is worth around £18 million each year.  The aim is to provide an incentive for the retention of cattle in more peripheral areas, both for environmental and social reasons.  Payments will be directed to beef bred calves produced from the suckler herd, through a separate scheme called the [GF002967]{TITLE}[/GF].

National Reserve

The National Reserve (which covers the whole of the UK) was established from an initial 3% reduction to entitlements under the Single Farm Payment Scheme.  In February 2006, it was announced that financing the National Reserve (around £25.5 million) would require entitlements to be reduced by 4.2% for the 2005 scheme year.  In addition to the automatic categories identified in the Single Farm Payment legislation, the Scottish Government has confirmed that National Reserve entitlements are also available to the following:

  • New entrants to farming - available to those who started farming during or after 2002.  The position of new entrants will be reviewed at the end of 2005.
  • Farmers who wish to concentrate entitlements on fewer hectares in certain situations where they farm less land compared with the reference period.

The National Reserve is a compulsory element of the CAP Reform legislation and its provisions exist to address transitional issues in the move to the Single Farm Payment Scheme.

The legislation requires the following categories to be dealt with through the National Reserve:

  • Dairy farmers who leased out quota in the 2004/05 quota year due to force majeure or exceptional circumstances.
  • Transfer of leased land.  Farmers who, under certain conditions, received land that was leased to a third person during the reference period, from a farmer who retired or died before 15 May 2004.
  • Investments.  Farmers who made investments in production capacity or purchased land by 15 May 2004, in accordance with the details set out in the legislation.
  • Lease and purchase of leased land, since the end of the reference period and 15 May 2004, where the lease conditions cannot be adjusted.
  • Reconversion of production under national programmes will apply to participants in SNH agri-environment agreements.

Entitlements allocated from the National Reserve have additional obligations attached to them which make them different from normal entitlements.  They must be used each year for the first five years from allocation or they will revert back to the National Reserve.  There is also a restriction on their transfer for five years.  In comparison, normal entitlements revert to the National Reserve if unused after three years.

Trading entitlements

The trading of entitlements is a feature of the SFPS; entitlements are not tied to the land.

Scottish entitlements can be traded at any time of the year, subject to requirements for notifying the Department in advance.  They can be traded with or without land, but they can only be leased if they are accompanied by an equivalent number of eligible hectares.  Normal entitlements can only be transferred without land after a farmer has used at least 80% of his entitlements during at least one calendar year, or after he has given up voluntarily to the National Reserve all the entitlements he has not used in the first year of application to the new scheme.  Entitlements which have been allocated from the National Reserve cannot be transferred for a period of five years starting from their allocation.

Under a decoupled system, the existence of entitlements in a particular location is not the driver of agricultural production and related activity.  In this way, entitlements differ from previous trade in livestock quota.  In addition, the ability to trade in entitlements provides further opportunities for farmers for diversification and investment.

How To Apply

Deadline(s):

Annual. Usually, annual submissions for support must be made by 15 May. (if 15 May is a Saturday or a Sunday, the deadline date is that of the following Monday). 2016 deadline extension: 15 June 2016.

Except in cases of force majeure, penalties are applied for late submissions. If the delay is more than 25 calendar days, the application is inadmissible and the producer is not allocated grant.

Frequency: Ongoing programme.

Link to guidelines:

https://www.ruralpayments.org/publicsite/futures/topics/all-schemes/basic-payment-scheme/

https://www.ruralpayments.org/publicsite/futures/topics/all-schemes/basic-payment-scheme/basic-payment-scheme-full-guidance/activating-your-entitlements---bps/

Useful information:

SEERAD issued participants with a claim form in March 2005 showing their entitlements. They must check and sign the claim form to indicate acceptance of obligations and undertakings and return it by the deadline. Facilities are available to submit the application form electronically.

Participants also have to submit an IACS aid application form and associated field data sheets etc covering current eligible land in order to claim payment under the SFPS on entitlements they hold.

Publications on cross-compliance conditions, set-aside entitlements, etc may be found on the Scottish Government website:

http://www.scotland.gov.uk/Topics/Agriculture/grants/Schemes