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Comment on CAP Reform

Agriculture specialist comments on CAP reform.

Colin Clark,

agriculture partner at Pagan Osborne and accredited agricultural law specialist, said:

Recent reports from a leaked document about the possibility of capping direct subsidy payments for larger farm businesses has caused concern.  Scotland has larger farms than most other countries in the EU and will be hit harder if these measures are introduced.

At the moment it is only a draft policy paper, which, given that the review of the CAP subsidy payments will not be completed until 2013/4, may not actually be implemented.

One obvious way to try and avoid a cap on subsidy payments is to split an existing business into separate parts, each of which will then make a separate smaller claim. There are dangers with this as anti-avoidance measures will undoubtedly be introduced. We have experienced this in the past with previous CAP reforms where many businesses were split to try to maximise claims. In most cases this did not work as strict interpretation of the rules relating to what constituted a separate business particularly between connected parties meant that many family farmers who split enterprises on their farms between say father being responsible for the arable business and son running the livestock business were not successful.

Similar strict interpretations are likely to apply if these measures are introduced and any businesses that are split will no doubt have to show that there are genuine reasons for doing so.  Splitting a business may have tax, financial and other implications and should not be rushed into on the back of one leaked report.

The whole subsidy regime is under review and taking action to avoid one perceived threat may be jumping out of the frying pan and into the fire.


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