CAP Reform – Will the Active Farmer Test Apply To You?

6th March 2013

Farmers and landowners who have businesses other than farming or who are considering restructuring their businesses should be aware of changes to the ‘Active Farmer Test’, which is under review as part of the proposed CAP Reforms.

The ‘Test’ was introduced to check that claimants to the new Basic Payment Scheme, which replaces the Single Payment Scheme are genuine farmers and the impact of this test is likely to have the greatest effect on farms and estates running large diversified businesses, ‘hobby farmers’ and institutions who run farms as an adjunct to what they mainly do e.g. education, research or conservation.

The test proposes that no direct payments will be made to claimants who fail to meet the tests of ‘actively farming’.

As currently drafted, these tests are:

  1. Claimants’ land is naturally kept in a state suitable for grazing or cultivation and the claimant does not carry out the minimum agricultural activity. This has been developed to ensure that member states draw up a framework to record these agricultural areas.
  2. The claimant falls into a “negative list”, currently drafted to include (amongst others) companies managing sports grounds, mining companies, camp site operators and real estate companies. Failure of this test will result in automatic exclusion from funding unless it can be proved that farming contributes a substantial share of income. Member states have the ability to adapt their respective negative lists.
  3. Agricultural activities form only an insignificant part of the claimant’s overall economic activities (again, grounds for application to be drafted by member states).
  4. The claimant’s principal activity or company objectives do not consist in exercising an agricultural activity (again, grounds for application to be drafted by member states).

This represents significant progression from the original proposal which excluded those whose non-agricultural business turnover was greater than 20 times the Single Payment and/or have no agricultural activity on the farm.

To some extent, the removal of this aspect of the Active Farmer Test has helped with the practical administration issues such as the disclosure of farm accounts which would have been used to prove turnover.

The recent voting seems to demonstrate for certain that the Active Farmer Test is an area of the reforms which will be retained. In terms of tasks going forward and what measures should be taken, Farmers and Landowners would be advised to wait for a concrete reform position as to the introduction of the Active Farmer Test, as there may well be further change. However, it would pay farmers that are considering making business changes to be aware of it now to avoid falling foul of it later, although there is no certainty as to how the regulations to be drafted in the UK will ultimately look.

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