Sustainable Farming Incentive Pilot

Photo by Spencer Pugh on Unsplash

Deadline alert: interest needs to be registered by 11 April 2021

The Sustainable Farming Incentive is designed to fill in the amount of basic payments that are tapering away over the next few years in England. This is one of three new schemes alongside the Local Nature Recovery and the Landscape Recovery schemes which are going to be piloted next year.

The scheme applies to farmers who are already receiving Basic Payment, and is due to be launched in mid 2022. Further information is scheduled to be released later this summer with the full details to enable farmers to get ready. However there is now an opportunity for farmers who are interested in getting involved in the pilot scheme and there is a deadline for applying of 11 April 2021.

This is how it all fits together – taken from the Government announcement:

The initial eight standards to be taken into the pilot are as follows:

  • arable and horticultural land
  • arable and horticultural soils
  • improved grassland
  • improved grassland soils
  • low and no input grassland
  • hedgerow
  • on farm woodland
  • waterbody buffering

With each standard there are three levels for participants to choose from: introductory, intermediate and advanced. These are all allocated specific payment amounts per hectare which I set out in a table below. Formal land management plans are not going to be part of the initial application but participants are going to be asked to prepare them as part of the learning process. To me this seems like a good opportunity for farmers and their advisors to learn more about the land and how to get the most out of it.

It is expected that reporting back may involve, on average, around the farmer to spend 10-15 hours per month to inform government learning on the scheme.

There will of course be some monitoring and some regulation behind the scheme but the impression given that this is going to be light touch and the most appropriate methodology for these will be developed alongside the pilot.


For the first phase, a farmer is only eligible if:

  • they are a recipient of the Basic Payments Scheme
  • the land is in England
  • there is no existing agri-environment agreement on the selected land
  • they must either own the land with management control or have a tenancy of enough length to implement their pilot agreement

It does not apply to land registered as common land or shared grazings

Payment amount

StandardInitial base rates (first phase of pilot only)
Arable and horticultural landfrom £28 up to £74 per hectare
Arable and horticultural soilsfrom £30 up to £59 per hectare
Improved grasslandfrom £27 up to £97 per hectare
Improved grassland soilsfrom £6 up to £8 per hectare
Low and no input grasslandfrom £22 up to £110 per hectare
Hedgerowfrom £16 up to £24 per 100 metres
On farm woodland£49 per hectare
Waterbody bufferingfrom £16 up to £34 per 100 metres

In some cases some further payments available, so it is worth looking up the documentation.

Timescale and first deadline

By 11 April 2021: Submit an expression of interest here

June 2021: selected farmers invited to submit an application

Summer 2021: agreements processed

October 2021: first agreements go live

November 2021: first monthly payments issued

Submit an expression of interest by midnight on 11 April 2021 if you want to join the pilot of the Sustainable Farming Incentive scheme.

To accountants

To the accountants among my readers I would say this: the government is stating that the Sustainable Farming Initiative should be easy enough for most farmers to be able to engage with without taking professional advice, and therefore I think this is an initiative that accountants should take on as part of their annual service to their clients. We don’t need to be experts in agronomy to be able to point out what is available on the official website. However, being close to the numbers enables us to weigh up the published figures on this guidance against current basic payments and historic farm performance.


Otter spotted . . .

The coronavirus pandemic has meant spending more time at home than I had originally planned for. Partly for this reason, one moment I was anticipating came while I was at home, staying safe and getting ready for a quiet new year. This video is from an estate of which I am a trustee, and which I take part in managing.

Until New Year’s Eve we had not seen Otters in the waterways, so this was the first appearance. We think she is a grown female pregnant with kits, so we are very thrilled to we may have a new family of otters. This one has just succeeded in catching a rather large and tasty looking fish.

This is going to be the year when work starts in earnest to bring the lake and rivers up to a good standard, making use of the new ecosystem service payments scheme within Tier 2, or even a Tier 3, under the new Environmental Land Management Scheme.

Otters are protected so we will, of course, be ensuring that all plans fall within all published guidance. It is my view that we protect wildlife best by allowing people to see and understand it. By doing this we build respect and love for the wonderful creatures living with us on this earth so it will be natural that we should find ways to live in harmony together with them.

A lot of value is gained from creating connected spaces for wild animals which means working with landowners for connected spaces. This is where the Tier 2 and Tier 3 schemes can help bring people together with a financial incentive.

I have had some interesting experience over the last year getting involved in a couple of rewilding projects, and especially thinking about how the tax and economics work. It is quite interesting that rewilding under the new schemes with the existing tax rules can give some surprising advantages to the landowner. Not least of these is that the payments for ecosystem services where there is a plan to carry out some actions for wildlife, and especially where those payments are based on results, can be treated as trading payments. Under current this this changes the nature of the land into being an asset that can qualify for business relief for inheritance tax purposes.

As the year progresses I will of course be sharing with you, from time to time, any interesting insights we gain in putting this scheme into place.

Stephen Poole


Government guidance on protection of Otters

Planning ahead of the Budget

Photo by Michał Parzuchowski on Unsplash

Rishi Sunak is planning to give a Budget on 3 March 2021, and it is expected that there will be changes to various taxes including capital taxes included in that. There is some published information to base thoughts on possible changes and it is worth giving this some consideration.

Inheritance Tax

There are two main sources of information to consider here as follows:

  • All-Party Parliamentary Group on Inheritance and Intergenerational Fairness (APPG) which published its report “Reform of inheritance tax” in January 2020
  • The Office of Tax Simplification which published the document “Capital Gains Tax Review: Simplifying by design”

The APPG has been considering in the round what is fair for capital taxation. Its main proposal seems to be to reduce the amount of intergenerational transfer of assets where there is no tax charge. Their suggestion to achieve this is to have an annual exemption for gifts of around about £30,000 and for there to be an immediate tax charge of around 10% on the value of gifts above that.

What is now the nil rate band of £325,000 would be called the ‘death allowance’ and this would only apply on death. The group considered a rate of 40% to be excessive but instead would be looking at a rate of between 10% and 20% on the basis that this would be a low enough rate for the tax to be broadly based without the need for complex reliefs. This would go along with an abolition of agricultural and business reliefs on the grounds that a 10% rate spread over 10 years, i.e. 1% per year could be paid annually out of net income and would be seen to be fair. In any event any relief for trading is likely to be pinned to an 80% test rather than a 50% test as is now the case for inheritance tax.

This leaves open the question as to how trusts would fall into this as there was no death, and the answer would probably be an annual charge which like the 10 year charge we have now would seek to equate the inheritance tax in the trust to that of a human life.

The main residence nil rate band is seen as an unnecessary complication and I would expect this to be abolished in the budget.

Capital Gains Tax

As far as capital gains tax is concerned the suggestion in the APPG report which has resonances in the Simplifying by design report is to take away the probate value uplift on death. The APPG goes further here in that they do link this to IHT relief is that so this would apply in all cases, whereas in Simplified by design the office of tax simplification consider only taking the probate value uplift away where an asset has been exempted from inheritance tax either by way of agricultural or business relief.

There is broad agreement within the profession that the rate of capital gains tax is likely to be increased from the current rates of 10% and 20% in (18% and 28% for residential property) to the rate of income tax which are 20% 40% and 45%. It has always been my view that such rates would be unfair as capital gains include an element of inflation. The Simplifying by design report meets this question by introducing the concept of an inflationary relief, which would take us full circle back to where capital gains taxes were until 2008. The thinking behind having capital gains tax rates around half of income tax rates is to give a broad brush relief for indexation while keeping the walls simple, and this is the reason that many jurisdictions have a lower rate for capital gains tax as compare to income tax.

If a sale of the assets was imminent, I would advise the tax payers to consider entering into some planning, for example a contract for sale that is left uncompleted. However, if a sale is unlikely I would advise against such action as this may just cause more complications.

Income Taxes

Dividends are taxed at the rate of 7.5% in the basic rate rising to 32.5% for higher rate and 38.1% for additional rate taxpayers. This is markedly lower than the rates of income tax on other sources of income (20%, 40% and 45%) as it is intended to reflect the payment of corporation tax in the company. Whilst this may seem fair for listed companies that pay dividends out at arm’s-length, it seems less fair in the context of comparing dividend payments with payments of remuneration which are subject to national insurance contributions.

Two potential changes have been identified, either or both of which Rishi Sunak may wish to pursue – either national insurance might be added to dividends paid from close companies, or the rate of income tax on dividends might be increased to the full rate of income tax.

If the rate of income tax is increased then the deduction in the company for remuneration would be seen to compensate for the lack of national insurance payment on the dividend, so it would seem unfair to introduce both.

I think the likelihood of either of these changes is quite high and therefore I would strongly recommend that if dividends are being contemplated before sixth of April such payments should be made before budget date.


APPG Reform of Inheritance Taxes (via STEP)

Capital gains tax: Simplifying by design

Green Industrial Revolution – trees to the rescue!

Boris Johnson has today outlined his Ten Point Plan for a Green Industrial Revolution to support up to 250,000 new jobs.

The 10 points are:

  1. Offshore wind: Producing enough offshore wind to power every home, quadrupling how much we produce to 40GW by 2030, supporting up to 60,000 jobs.
  2. Hydrogen: Working with industry aiming to generate 5GW of low carbon hydrogen production capacity by 2030 for industry, transport, power and homes, and aiming to develop the first town heated entirely by hydrogen by the end of the decade.
  3. Nuclear: Advancing nuclear as a clean energy source, across large scale nuclear and developing the next generation of small and advanced reactors, which could support 10,000 jobs.
  4. Electric vehicles: Backing our world-leading car manufacturing bases including in the West Midlands, North East and North Wales to accelerate the transition to electric vehicles, and transforming our national infrastructure to better support electric vehicles.
  5. Public transport, cycling and walking: Making cycling and walking more attractive ways to travel and investing in zero-emission public transport of the future.
  6. Jet Zero and greener maritime: Supporting difficult-to-decarbonise industries to become greener through research projects for zero-emission planes and ships.
  7. Homes and public buildings: Making our homes, schools and hospitals greener, warmer and more energy efficient, whilst creating 50,000 jobs by 2030, and a target to install 600,000 heat pumps every year by 2028.
  8. Carbon capture: Becoming a world-leader in technology to capture and store harmful emissions away from the atmosphere, with a target to remove 10MT of carbon dioxide by 2030, equivalent to all emissions of the industrial Humber today.
  9. Nature: Protecting and restoring our natural environment, planting 30,000 hectares of trees every year, whilst creating and retaining thousands of jobs.
  10. Innovation and finance: Developing the cutting-edge technologies needed to reach these new energy ambitions and make the City of London the global centre of green finance.

There will be a the target of 30,000 hectares of tree planting per year from 2025, and using the Agriculture Act to encourage farming and land use techniques to sequester carbon in the soil and in woodland.

In my view the country is in a good place with the Agriculture Act and there is already a lot of activity in rewilding to allow this to happen quite quickly especially considering tier 2 and tier 3 schemes. I would like to see tier 3 being brought forward from 2024 to help this happen.

I’m fairly comfortable that the current tax system, and including changes potentially to be made under the new review, will fit fairly comfortable with this if rewilding is treated as an activity in the nature of husbandry and so gain various advantages from a tax point of you. And I think this is the way thought is headed now.

Let’s wait and see how this develops.


PM outlines his Ten Point Plan for a Green Industrial Revolution for 250,000 jobs

Here we go round the roundabout

Capital gains tax reform

Photo by Christian Chen on Unsplash

Round and round we go. Just as we’ve got used to the new way let’s go back to the old way.

The report published today is on policy design and principles underpinning capital gains tax and sets the stage for second report will be coming out next year we should explore the technical and administrative issues underneath this. The reports have been produced quite quickly which suggests that there is going to be a change on this in the short to medium term.

The report covers only individuals and does not cover trusts or attribution of offshore gains to UK resident individuals nor does it look at the position as regards arrival and departure from the UK. It is therefore fairly narrow in its scope, but arguably seeking to cover most capital gains in reality.

The main recommendations are as follows

  • More closely aligning capital gains tax rates with income tax and addressing boundary issues between capital and income
  • Reduction of the annual exempt amount so it becomes simply an administrative de minimis
  • Back to a formal relief for inflationary gains
  • More flexible use of losses
  • Simplify the large number of capital gains tax rates
  • Looking again at share based rewards arising from employment

Interaction with Inheritance Tax

In addition to the above specific recommendations, the report looks at making the interaction between capital gains tax and inheritance tax more coherent. In particular they discuss the inconsistency whereby on death a business asset can be entitled to a free capital gains tax uplift which is also exempt from inheritance tax.

This widely idea here is that where there is an exemption from Inheritance tax the government would remove the capital gains tax uplift so the beneficiary would receive the asset at original capital gains tax cost. A problem with this is that the original purchase date of many assets is sometimes going to become very historic and records will probably not exist. At the moment on death, the wiping of the slate clean enables capital gains tax to be accurately calculated for the beneficiary.

Back to retirement relief

Interestingly the government seem to have gone full circle on business disposal relief which gives a 10% rate for business assets (which we used to call entrepreneurs relief) and which replaced a retirement based relief 2008. They appear to be going back to the idea of a retirement based relief. Round and round we go . . .


This report shows quite clearly the pressures on income tax and capital gains tax. Capital gains tax is needed to cover gains made on assets but also to prevent income from wealthy people being converted into capital gains and therefore avoiding taxation.

A de minimis is useful for most people who will never have any significant capital gains other than on small amounts of investments and sometimes some chattels. There is a bewildering a way of reliefs in this area and this could all be swept away by having a small day minimus band.


Capital Gains Tax review

Sustainable Farming Initiative (England)

Photo by ASHLEY EDWARDS on Unsplash

We are starting to hear murmurings of the birth of a new scheme – the sustainable farming initiative in England. The environmental land management scheme is coming into force from 2024, but until then we will be under this new scheme in England. The illustration above gives full details of the scheme as available at present.

Scotland and Wales have their own systems and will not be part of this plan.

Chancellor’s plan for winter

Photo by Rebecca Prest on Unsplash

Support for workers

Furlough is ending on 30 October, and as a partial and we are told more targeted replacement with have a new Job Support Scheme which will be introduced from 1 November. This will apply for ‘viable’ jobs in businesses who are facing lower demand due to coronavirus. The scheme starts on 1 November 2020 and will last for 6 months..

Employers will continue to pay the wages of staff for the hours they work – but for the hours not worked, the government and the employer will each pay one third of their equivalent salary.

In order to support only viable jobs, employees must be working at least 33% of their usual hours. The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.

This is a simplistic example based on weekly payments for a 36 hour week at £10 per hour.

Total normal weekly hours3612
Pay per hour£10
Normal weekly360120
Unworked hours24
Employer top up -1/3 of 24880
HMRC top up – 1/3 of 24880
Total gross pay£360£280
Percentage of normal pay78%
Cost per hour work£10£16.67

Taxes, national insurance and pension costs do not seem to be included. If I find out more I will extend the example.

The scheme is designed to work alongside furlough and in particular

  • The Job Support Scheme will be open to businesses across the UK even if they have not previously used the furlough schem.
  • It is designed to sit alongside the Jobs Retention Bonus and could be worth over 60% of average wages of workers who have been furloughed – and are kept on until the start of February 2021. Businesses can benefit from both schemes in order to help protect jobs.

Self employed

In addition, the Government is continuing its support for millions of self-employed individuals by extending the Self Employment Income Support Scheme Grant (SEISS). An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. This is worth 20% of average monthly profits, up to a total of £1,875.

An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April – ensuring our support continues right through to next year. This is in addition to the more than £13 billion of support already provided for over 2.6 million self-employed individuals through the first two stages of the Self Employment Income Support Scheme – one of the most generous in the world.

VAT cut and deferrals

As part of the package, the government also announced it will extend the temporary 5% VAT rate for the tourism and hospitality sectors to the end of March next year.

In addition, up to half a million business who deferred their VAT bills will be given more breathing space through the New Payment Scheme, which gives them the option to pay back in smaller instalments. Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.

On top of this, around 11 million self-assessment taxpayers will be able to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.

Giving businesses flexibility to pay back loans

The burden will be lifted on more than a million businesses who took out a Bounce Back Loan through a new Pay as You Grow flexible repayment system. This will provide flexibility for firms repaying a Bounce Back Loan.

This includes extending the length of the loan from six years to ten, which will cut monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available to businesses. These measures will further protect jobs by helping businesses recover from the pandemic.

We also intend to give Coronavirus Business Interruption Loan Scheme lenders the ability to extend the length of loans from a maximum of six years to ten years if it will help businesses to repay the loan.

In addition, the Chancellor also announced he would be extending applications for the government’s coronavirus loan schemes that are helping over a million businesses until the end of November. As a result, more businesses will now be able to benefit from the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund. This change aligns all the end dates of these schemes, ensuring that there is further support in place for those firms who need it.


My fundamental problem with this is understanding why an employer would enter into the scheme. It costs them more to employ the person part time than it does to employ someone else full-time as part of the role to carry out that work. I totally except that I might be missing something, or there may be rules introduced in legislation to protect existing workers. We will have to wait and see.

The reduction in the rate of the self-employed income support scheme to 20% seems particularly severe. I am surprised that it’s gone down from 80% via 70% and now straight to 20%.

It is interesting that possibly for the first time ever and economic plan has been published with absolutely no costing at all.

And no, there was really no excuse for another red squirrel picture…

Should we be scared of tax increases?

Photo by Geran de Klerk on Unsplash

Right now squirrels across the country are collecting up nuts getting ready for winter, food that they hope will feed them into next year. We as a country I’ve had a complicated year with Coronavirus and the vast social issues that has created and there are many people now who are receiving help from the government and all of this needs to be paid for. Many of us have some money squirrelled away for many of us that amount might be reducing, And it may be with some concern that we think about what tax rises there might be in store for us.

My aim here is to collect together the announcements that have been made, and some thoughts about what we might be expecting when Rishi Sunak next stands up for his autumn budget, and I will update this as we get closer to the budget. As at the date of writing the budget date has not yet been announced.

Income Tax

It is very unlikely that the rate of income tax will change in the short to medium term. Indeed with the current Labour opposition there is little pressure on the government here.

It is possible that a hypothecated increase in national insurance contributions might be introduced, but this would probably be unpopular and would take money away from the very people who need to be spending it right now.

Corporation Tax

The government have let it be known that corporation taxes might float up to somewhere around 24% almost returning to the rate of 26% at which they stood when the Conservative government came to power. Labour are not currently putting any pressure on corporation tax rates.

It is very possible that corporation taxes will be restructured to take away some of the advantages to small companies of using dividends to reduce national insurance contributions. We have been waiting a long time for such changes, and this may be as simple as applying national insurance to dividends paid to directors of close companies for example.

Business reliefs

There is increasing speculation that that might be tax relief for business investment, and this may involve another yo of the capital allowances yo-yo. The annual investment allowance is currently at £1 million under a temporary measure which expires in December 2020. It might be that this gets prolonged a little bit longer.

Alternatively the Chancellor may look at shareholding beliefs such as extending the Enterprise Investment Scheme or the Seed Enterprise Investment Scheme. Both of these beliefs are aimed at investors who are investing monies into new or relatively new companies. In the situation where we as a country need investment into new companies and investors have cash in their bank accounts it would seem sensible to allow new businesses to bubble up using such a relief. Having said that the seed enterprise investment scheme is already very attractive and a little bit of tweaking to take away some of the complications and bear traps involved in this relief might be more rewarding.

Capital Taxes

There is already a review into capital gains tax which has been referred elsewhere in this page. There is current speculation that the rate of capital gains tax might be increased up to income tax rates, but this might be seen to break with an important underlying philosophy of capital gains tax that it should not tax inflationary gains. It is for this reason that in the history of capital gains tax there have been various mechanisms to relieve the inflationary gains, starting with an indexation allowance moving onto a type of relief and currently a simple rough halving of the rate. To my mind it seems fair that capital gains tax rate is half the rate of income tax if that is seen as a simplified relief for installation of the gains.

Looking more broadly, the reason we have to have a capital gains tax is that if there was not such a tax, wealthy individuals who are able to control cash flows, might arrange that all of their ‘income’ will take the nature of capital and they would thus escape taxes. There is a long history of anti-avoidance legislation targeted at treating such short-term gains as income and it may be that this is a more fertile ground for short-term capital gains. This might lead to a general rule introduced which says there are short-term capital gain, safer assets held for less than two years, might be just added in as income.

Inheritance tax is constantly under review and this might be fairly fertile ground for changes. The rate of inheritance tax at 40% for death transfers or 20% for lifetime transfers is analogous to the rate of income tax at a basic rate (20%) or the higher rate (40%).

With rules to tax non-UK domiciled individuals on UK residential property (even when held by a non UK company) for both inheritance tax and capital gains tax, it is getting more difficult to avoid inheritance taxes on property. It would not be very surprising to see the non-domicile walls swept away completely to put all individuals on an equal footing here. It would then be the case that a non-resident individual might simply be taxed on assets in the UK without the complications that we have now. It is often the complications that allow for cracks through which tax can leak.

Taking away the tax-free probate uplift on property where not subject to inheritance tax would create a nice tax take for the country. It is clearly right and proper that if the value of an asset has been subject to inheritance tax that same value should then be the base cost for a future disposal. If however the asset was exempt in the estate, by reason of nil rate band business property relief or agricultural relief for example, then it seems fair to both future capital gains on the original cost without that probate value uplift.

The idea of an annual wealth tax has been mooted, but I do not see an appetite for this at the moment. To me, a new tax on capital would be politically unacceptable to the Conservative party at this moment in time. However we will need to wait and see…


As we move away from Europe so we will be unshackled from the EU is VAT rules. This gives the Chancellor some scope for adjusting VAT rates or the commodities and services on which VAT is charged.


Photo by Markus Spiske on Unsplash

Businesses are now able to sign up to the Kickstart scheme under which people aged between 16 and 24 who are claiming Universal Credit can receive a six-month work placement.

Under the scheme, the Government will pay 100% of the age-relevant National Minimum Wage, National Insurance and pension contributions for 25 hours a week.

Employers will be able to top up this wage, while the Government will also pay employers £1,500 to set up support and training for people on a Kickstart placement, as well as helping pay for uniforms and other set up costs.

Further information can be found Landmark Kickstart scheme opens.

Capital Gains Tax review

Photo by Adeolu Eletu on Unsplash

This is coming at an interesting time: Rishi Sunak has called for a review of capital gains tax. The review will consider Capital Gains Tax and the taxation of chargeable gains in relation to individuals and smaller businesses and develop recommendations for simplification including reducing distortions from both an administrative and technical standpoint.

This will include consideration of general areas such as:

  • the overall scope of the tax and the various rates which can apply
  • the reliefs, exemptions and allowances which can apply, and the treatment of losses
  • the annual exempt amount and its interactions with other reliefs
  • the position of individuals, partnerships and estates in administration
  • the position of unincorporated businesses and stand-alone owner-managed trading or
  • investment companies, including the setting up, selling or winding up of such businesses or
  • companies
  • any distortions to taxpayers’ personal or business investment decisions
  • interactions with other parts of the tax system such as Income Tax, Capital Allowances,
  • Stamp Taxes and Inheritance Tax, including potentially different definitions for similar
  • transactions/events.

This is an area that has changed many times over the years, and it almost feels that each Chancellor wants to carve his or her own identity into the capital gains tax system. Let’s wait to see whether Rishi Sunak can make capital gains tax sit alongside all other taxes comfortably, most especially income tax. We wait with bated breath.

Details are available here


Capital Gains Tax Simplification Review: Scoping Document