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Government U-Turn on Siphon Ruling: A Victory for Common Sense
Recent EC Regulation 1307/2013 has radically changed the farm subsidy landscape and created inevitable uncertainty in its wake.
The Scottish Tenant Farmers Association (STFA) consulted Terra Firma Chambers’ Luise Locke regarding the Scottish Government’s interpretation of the Regulation that:
a) The assignation of a farm lease did not fall within the definition set out at Article 4 of a “land transfer”, and
b) As a consequence, any transfer of subsidy entitlement which accompanied such a lease assignation would trigger the 50% siphon of subsidy entitlement permitted by Article 34(4).
Fortunately for tenant farmers, STFA were alert to the significant impact the Scottish Government’s stance would impose on succession planning where assignation of a farm lease to a near relative successor is the usual route to retirement.
The intention of the Scottish Government in introducing the 50% siphon was to curtail the financial subsidy support to “slipper farmers”. However, it would also have the unintended effect of using succession by assignation as a trigger to claw back half the farm payment entitlement with attendant impact on farm finances and their long term economic viability. This flies in the face of the Scots legal tradition regarding real rights of a tenant and the Scottish Government’s policy of encouraging wider succession to agricultural tenancies.
STFA forwarded the legal advice they received from Luise Locke to the Scottish Government who, as a result, have now revised their position. The Government has made it clear to STFA that an assignation of a farm lease is the transfer of an interest in land which does fall within the definition of a land transfer and as such the 50% siphon will not be invoked.
The change in stance is welcomed by those tenant farmers who have recently made succession changes and those about to do so.