Eligibility of Agricultural Businesses for the Self-Employed Income Support Scheme

01.06.2020
Matthew Waters
Agriculture

The Self-Employed Income Support Scheme (SEISS) was introduced as part of the government’s business support measures, replicating the some features of the Job Retention Scheme (JRS) for employees.

It provides self-employed individuals with a payment of 80% of their average monthly profits, paid in a single instalment covering 3 months, and capped at £7,500.

On 29 May, the Chancellor announced that the scheme would be extended with those eligible able to claim a further grant, this time worth 70% of their average monthly profits and capped at £6,570.

A claim can be made under the SEISS if they’re a self-employed individual or a member of a partnership and all of the following apply: 

  • they traded in the 2018/19 tax year (and submitted their 2019 tax return on or before 23 April 2020)
  • they traded in the 2019/20 tax year
  • they intend to continue to trade in the 2020/21 tax year
  • they carry on a trade which has been adversely affected by coronavirus 

It is the final requirement which requires careful consideration for those whose income is derived from the agricultural sector so as to not make a SEISS claim which could later be repayable and subject to potential penalties.

Below are several areas where the pandemic can be demonstrated to have adversely effected the farm business to support a claim under the SEISS.  It is important to note that ‘adversely’ affected does not simply mean a fall in profits; if you projected an increased profit of 20% but, only enjoyed 10% growth this too should qualify. You will need to keep evidence to support any claim.

Dairy and Livestock

In a sector where the small dairy farm has become a rare entity and herd sizes have generally increased to remain sustainable, everything hinges on the pence per litre paid by the milk processor. A drop of a penny per litre caused by the impact of the pandemic on the supply chain, can instantaneously see a turnover reduction of almost 4%.

That is where the milk has been able to leave the farm. Many people will have seen the footage of thousands of litres of milk being dumped as dairy farmers were forced to empty their tanks due to processors having no demand for it.

Coffee-culture, in more usual times, created a large market for milk processors. But with the high-street chains, fast food outlets and hospitality sector closed down, the daily demand for millions of morning lattes or flat-whites has evaporated.

The closure of fast food and other food service outlets has impacted cull cow prices, with a significant fall between the beginning of March and the end of April. The rising demand for mince during lockdown has led to a greater proportion of higher value cuts being devalued as part of the whole carcass price.

Arable

Potatoes

The blanket closure of fish and chip shops and fast food chains, coupled with the drastic reduction in demand from pubs and restaurants, has had a dramatic impact on potato growers. Where growers have found a market, there may still be transportation issues which will limit what has been able to leave the farm.

Malting Barley

When the Prime Minister announced that pubs and restaurants must close for the foreseeable future on 20 March, the demand for beer production slumped and with it the demand for malting barley. The export market for the surplus malting barley is still an option, but the additional logistics costs of transporting this through countries with varying lockdown and travel regulations would be a significant barrier.

The most available market for farms with 2019 harvest malting barley still to sell, and a 2020 harvest to be brought in, would be animal feed, realising a lower price per tonne.

Wheat

The milling wheat supply chain has been largely uninterrupted. The much publicised shortages of flour on supermarket shelves was more down to the huge shift in demand from bulk bags for the baking industry to small bags for the home baking market than any issues at the processing end.

Workforce

In an industry where, prior to the Covid-19 pandemic, mental health issues linked to isolation was a growing concern, the strict social distancing guidelines have had little impact on day-to-day working for some of the agricultural sector.

That isn’t to say that the farm’s workforce cannot be adversely effected by Covid-19. The requirement to self-isolate due to illness in a household could remove key members of not only the farm’s workforce, but those of the producers on whom the farm is reliant.

There is a large test of the UK labour market looming on the horizon with the 2020 harvest, particularly for fruit and vegetable growers. Travel restrictions and the self-isolation rules will create a barrier to imported labour and leave farms short-handed and incurring additional contract costs to bring the harvest in. 

Diversification

This is likely to be the area in which businesses will see the greatest impact, especially those that have diversified into leisure and tourism.

Overview

The continual need for the farming sector to diversify and create new income streams means that the above won’t cover all the areas of your business which have been impacted by Covid-19. With the understanding of all the enterprises run from your farm, your usual Lovewell Blake adviser will be happy to talk through the basis of the claim with you. 

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