FBTs & ELMS: Defra working group

Wed 09 Feb 2022

Defra has recently launched the Tenancy Working Group (TWG).

The TWG is an independent study group with a wide remit to include how the move to ELMS (Environment Land Management Schemes) funding will affect tenant farmers.

Covered under the ELMS umbrella are two schemes in particular which, at surface level, might not look viable for operators with Farming Business Tenancies (FBTs).

Both the Local Nature Recovery (LNR) and Landscape Recovery (LR) schemes depend on the availability of large tranches of land on a long term basis to ensure best success.

With the average FBT agreement being a 5-year lease, there is concern in the sector that these newly launched schemes, as they stand presently, may adversely exclude farming tenants.

However, Shouler & Son is already advising rural landlords to grant 6-year minimum FBTS and to make it clear they will permit their tenants to enter relevant ELMS schemes to underpin current rent levels.

The rationale for pegging at the 6-year mark is that an FBT for 7 years or more incurs commercial lease SDLT (Stamp Duty Land Tax).

This 6-year FBT also leaves the tenant in a more advantageous position to capitalise on any of the potential for ELMS funding, yet protects against liability for SDLT.

It is hoped that commercial lease SDLT liability on longer length FBTs is something that Defra’s new Tenant Working Group will examine as part of its independent review.

The group is scheduled to submit its report to Defra by the autumn.

In the meantime, rural landlords and tenants are urged to seek advice from qualified professionals.

For more information on Shouler & Son’s rural services and professional advice on eligibility for Defra grant funding contact Angela Wood, email a.wood@shoulers.co.uk, tel 01664 560181 or see shoulers.co.uk/pages/agricultural-services.