Understanding DEFRA payments has always been challenging and the introduction of numerous new schemes has only added to the confusion. Initially, the main DEFRA payments came from the Basic Payment Scheme (BPS). Despite some delays in the early years, these payments were typically disbursed in early December of the claim year. Stewardship payments usually followed a few months later, typically in March or April after the scheme year, requiring careful consideration for those with fiscal year-ends.
In a surprise move, BPS payments were accelerated in May 2022. Following the post-Brexit subsidy reform, payments began to be disbursed in equal instalments throughout the claim year, with 50% advanced in July and the balance paid in early December. Simultaneously, Stewardship payments were accelerated to December. This change, like the BPS adjustment, could result in two years of payments being received within a single accounting year.
The introduction of the Sustainable Farm Incentive (SFI) added further complications. Payments under this scheme are made quarterly, starting from the month of entry. Currently, three versions of SFI run parallel to older schemes, adding to the complexity. The pilot scheme is ending and the 2022 scheme was cancelled after a few months. Given that different parcels can be enrolled in each scheme, and some parcels may qualify for multiple schemes, farms could receive three sets of quarterly payments for a short time.
Recently, additional complications have arisen. Claimants under the 2022 scheme have been informed that they may be eligible for compensation due to the scheme's shortening. These complex calculations consider aspects of the overlap with the 2023 scheme and should be completed soon.
On 7 July, it was announced that changes in the SFI management element (£20/ha), introduced in February, would be paid separately to bring them up to date. Agreements starting between October 2023 and April 2024 will receive their first payment in July to cover past and due quarterly payments. Additionally, new delinked payments for 2024 will be made in two instalments: an advance payment of approximately 50% from 1 August, with the balance to follow from 30 September.
Given the vague remittance advices accompanying these payments, determining what each receipt represents and which fiscal year it belongs to can be challenging. Clients should retain all DEFRA paperwork and ideally annotate it upon receipt to ensure proper accounting at the end of the financial year, especially since some payments may impact the 2023/24 transitional tax year.
*The views expressed are the author's and not ICAEW's