In a surprise announcement on 6 May, the government has confirmed that, in order to help farmers with cashflow problems, the basic payments (and subsequent delinked payments) would be paid in two instalments for the remainder of the transitional period up to 2027. The first half payment should be arriving in bank accounts at the end of July.
The change in policy appears to have been precipitated by the sharp rise in input costs in recent months, and specifically fertiliser. Most fertilisers have risen in cost by over 100% in the last twelve months and even availability can be an issue. In the words of George Eustice:
“We have decided to bring forward half of this year’s BPS payment as an advance injection of cash to farm businesses from the end of this July. It will give farmers some additional cashflow earlier in order to provide some confidence. We will also make this a permanent change to the way we pay BPS in future with twice yearly instalments going forward.”
The accelerated payment dates will not only remain in place for the remaining life of the BPS regime but will also delinked payments thereafter. According to DEFRA “it’s a permanent change to bring Direct Payments in line with what will be a more regular payment system under the new environment land management schemes”.
As ever, there are some devils in the detail of the accounting recognition. In most cases there will be continuing expenses and responsibilities until December, so a careful reading of FRS 102/5 should enable the payments to be accrued over the accounting year. In the words of the standard:
“Government grants, including non-monetary grants shall not be recognised until there is reasonable assurance that: (a) the entity will comply with the conditions attaching to them; and (b) the grants will be received.”
A carefully thought file note might be able to conclude that condition (a) might not be satisfied by the end of July.
The slightly trickier problem will emerge in 2024 when the delinked payments are introduced. These will be purely an income support payment on which both standards say: “A government grant that becomes receivable …for the purpose of giving immediate financial support to the entity with no future related costs shall be recognised as income in profit or loss in the period in which it becomes receivable”. This would appear to mean that in 2024 (the transitional year for those businesses with non-fiscal year ends) there will be an element of catching up as the last payment of BPS is recognised on an accruing basis and the first delinked payment is recognised when receivable (albeit that be that stage the payments will be of a considerably reduced value).
*The views expressed are the author's and not ICAEW's.