The end of the Basic Payment Scheme, what about my entitlements?

2023 year was the final year of Basic Payment Scheme (BPS) submission requirements, with the industry transitioning to the delinked payment system for the remainder of the reduction period for area based payments through to 2027. With the transition to a delinked payment system by the Rural Payments Agency (RPA), BPS entitlements, once a tradable asset, lost their value as of 15 May 2023 when the submission window closed and in effect became an extinct asset from 31 December 2023.

Now that there is no longer any value associated with the BPS entitlements, taxpayers who had previously bought or inherited entitlements may be able to make a claim under Section 24 TCGA creating a capital loss. This scenario is reminiscent of the discontinuation of sugar beet and milk quotas, where similar loss claims were able to be made.

To make a claim, you will firstly need to establish the relevant value of entitlements attributable to each taxpayer. This may not be straightforward due to several factors, such as how the business is structured and how the entitlements were acquired. A claim under Section 24 TCGA must be made in a prescribed format otherwise there is a risk that HMRC will deny the relief entirely. It is also possible that HMRC will scrutinise the basis and values used for any claims made, so it is advisable to disclose all relevant facts when submitting your tax return.

The Capital Losses which are created can be offset against Capital Gains in the same or later tax years providing an advantage for taxpayers who may sell or gift assets such as land or property in the future.

For an individual, it is essential to report any capital losses within four years of the tax year in which they occurred so that they can then be used to offset Capital Gains at a later date. By 'banking' these losses now, taxpayers can secure valuable tax relief down the line. With the potential for CGT rates to be increased in the next budget, ensuring you have claimed all available loss relief is now more important than ever.

Need help?

If you’d like to discuss the specific circumstances in more detail, please get in touch with your usual Larking Gowen contact or email enquiry@larking-gowen.co.uk.

Andrew Whiting