The Number of entitlements to be allocated to a farmerTotal value of entitlements to be allocated to a farmer
Initial Unit Value of entitlements (obtained by dividing the total value of entitlements by the number of entitlements)The process for calculating each of these values is outlined below.
Calculating the Number of Entitlements
As noted previously (see Reference Points on page 9), the number of entitlements that will be allocated to a farmer under the new Basic Payment Scheme will be based on;
The number of eligible hectares the farmer declares in 2013 and 2015, whichever is lower
For example, if a farmer declares the following;
2013 |
50 hectares |
|---|
2015 |
Mandatory |
The number of entitlements allocated to this farmer in 2015 will be 40.
Number of Entitlements = Number of Hectares declared in 2013 and 2015, whichever is lower
Calculating the Value of Entitlements
The value of entitlements that will be allocated to a farmer in 2015 will be based on a fixed percentage of the value held by the farmer in 2014.
A farmer’s 2014 value consists of;
1. Total value of entitlements owned by the farmer in 2014 (including the value of
entitlements which the farmer has leased out in 2014)2. Total payment received by the farmer under the Grassland Sheep Scheme (if any)
A farmer who leases out entitlements in 2014 is considered to own those leased entitlements and the value of the leased entitlements will be assigned to the owner (lessor), not to the person who is leasing them in (the lessee).
As the Basic Payment ceiling forms only a percentage of the total 2014 value to be carried forward, only a percentage of the farmer’s 2014 value is carried forward to calculate the value of his/her entitlements in 2015.
For example:
2014 Value of Entitlements |
= €7,000.00 |
|---|
Entitlements leased out by the farmer |
|
2014 Grassland Sheep Scheme payment |
= €1,000.00 |
Total 2014 Value |
= €10,000.00 |
Estimated percentage carried forward |
= *60% |
Value used to establish entitlements in 2015 |
= €6,000.00 |
*It is estimated that approximately 60% of the value of entitlements held by a farmer under the Single
Payment Scheme and of the value of any payment the farmer receives under the Grassland Sheep Scheme
will be carried forward to the calculation of his total value of entitlements under the Basic Payment
Scheme. The exact percentage will not be known until 2015.
Calculating the Initial Unit Value
The ‘value’ that is carried forward from 2014 is spread across the ‘number’ of entitlements that is allocated to the farmer in 2015. This gives the farmer’s Initial Unit Value. The Initial Unit Value forms the basis of all subsequent convergence calculations for the value of those entitlements for each year of the scheme.
For example:
Number of Entitlements allocated in 2015 |
= 40 |
|---|
Value carried forward from 2014 |
= €6,000 |
Initial Unit Value |
= €150.00 (€6,000 divided by 40) |
Applying Internal Convergence
All entitlements held under the Basic Payment Scheme are subject to convergence.
In simple terms, those who hold entitlements with an Initial Unit Value that is above the Basic Payment Scheme national average will see the value of their entitlements decrease over the five years of the scheme while those with entitlements that have an Initial Unit Value that is below 90% of the Basic Payment Scheme national average will see the value of their entitlements increase gradually over the five years ofthe scheme. Those who hold entitlements that have an Initial Unit Value which is between 90% and 100% of the Basic Payment Scheme national average value will see no change.
There are three possible ‘convergence effects’;
Unit Value will Increase: A farmer whose ‘Initial Unit Value’ under the Basic Payment Scheme is below 90% of the Basic Payment Scheme national average value shall have his Initial Unit Valueincreased by one third of the difference between his ‘Initial Unit Value’ in 2015 and 90% of the Basic
Payment Scheme national average. This increase shall take place in five equal steps over the period 2015 to 2019.
Unit Value will remain unchanged: Where the Initial Unit Value held by a farmer is between 90% and 100% of the Basic Payment Scheme national average, the Unit Value of entitlements will remain unchanged.Unit Value will decrease: Where the ‘Initial Unit Value’ is above 100% of the Basic Payment Scheme national average, the value of such entitlements which is in excess of 100% of the Basic Payment Scheme national average will be reduced over the five years by whatever amount is required to fund the increase for those below 90% of the Basic Payment Scheme national average.The entire process of ‘convergence’ is based on the setting of a Basic Payment Scheme national average. The Basic Payment Scheme national average cannot be calculated until all land is declared and accepted as eligible under the 2015 scheme year. At this stage it is not possible to confirm the Basic Payment Scheme national average nor to identify those farmers who will be above or below that value.
Minimum Value by 2019
In addition to the standard level of convergence outlined above, a further test is applied whereby all
farmers must reach a minimum entitlement value of 60% of the Basic Payment Scheme national average by 2019. If a farmer does not reach 60% under the standard convergence, then the value of his entitlements will be increased in equal steps to ensure that by 2019 that level is reached.
Maximum Value by 2019
By 2019 no farmer may receive a payment per hectare (Basic Payment and Greening) of more than €700.00.
Farmers who hold entitlements with an Initial Unit Value that is above 100% of the Basic Payment Scheme national average will be converged downwards over the five years of the scheme. However if by 2019 they still receive a payment per hectare which is greater than €700, they will be further adjusted downwards so that their payment per hectare is not greater than €700. The test for this ‘maximum value’ therefore is not applied gradually over the five years of the scheme but only as a once-off adjustment in 2019.
Notification of Entitlement Value
The calculation of the value of entitlements under the Basic Payment Scheme cannot be undertaken until all land is declared and accepted as eligible in 2015. The number of eligible hectares in 2015 is required to calculate the ‘Basic Payment Scheme national average entitlement value’ around which the entire process of convergence is based. It is intended that a provisional statement of entitlements will issue in 2015 and that a definitive statement of entitlements will issue before April 2016.
Calculation of Entitlement Value for Sample Farmer
There are five steps involved in calculating a farmer’s payment under the new scheme;
1. Calculate number of entitlements2. Calculate total value of entitlements3. Calculate the Initial Unit Value4. Calculate convergence for each year from 2015 to 20195. Apply 60% Minimum Payment testThe following example is based on a sample farmer with a profile as outlined in the table on the left. The ‘national average entitlement value’ is estimated as outlined in the table on the right.
The following calculations would apply to this farmer in 2015;
Step 1: Calculate Number of Entitlements
Lesser of hectares declared in 2013 and 2015
Number of entitlements = 40
Step 2: Calculate Total Value of Entitlements in 2015
Value carried forward from 2014 (approx. 60% of €4,200.00)
Total Value of Entitlements in 2015 = €2,520.00
Step 3: Calculate Initial Unit Value in 2015
Total Value (€2,520.00) divided by Number of Entitlements (40)
Initial Unit Value = €63.00
Step 4: Apply Convergence
Difference between 90% Basic Payment Scheme average and
Initial Unit Value (€153-€63) = €90
1/3 of the difference = €30
Annual increase in Entitlement value (€30/5 years) = €6.00
2015 Entitlement value (€63 + €6.00) = €69
2016 Entitlement Value (€69 + €6.00) =€75
2017 Entitlement Value (€75 + €6.00) =€81
2018 Entitlement Value (€81 + €6.00) =€87
2019 Entitlement value (€87 + €6.00) = €93.00
Step 5: Apply 60% Minimum Value Test
60% Minimum of national average (60% of €170) = €102.00
At a unit value of €93.00, this farmer has not reached 60% minimum by 2019
Instead of an increase of €6.00, the farmer needs an annual increase of €7.80 to arrive
at €102.00 by 2019 = €7.80
2015 Revised entitlement value = €70.80
2019 Revised entitlement value = €102.00
Note that this farmer would also receive a Greening payment which will be calculated as a fixed percentage of the entitlements activated under the Basic Payment Scheme. If eligible, he may also receive an additional payment as part of the Young Farmers Scheme and a payment under the Coupled Support for Protein Crops.
For a farmer whose Initial Unit Value is above the Basic Payment Scheme national average, steps 1 to 3 will be applied in the same manner as outlined above. However such a farmer’s Initial Unit Value will be reduced each year. The reduction is applied only to the amount that is over 100% of the Basic Payment Scheme national average and will be based on the amount needed to fund the increase in the value of those farmers whose Initial Unit Value is below 90% of the Basic Payment Scheme national average.
The figures used above are based on estimates only and are solely for the purposes of illustration. The Basic Payment Scheme national average may be higher or lower than the figures presented depending on the overall number of eligible hectares declared in 2015.
Note on the Status of Leased Entitlements
All entitlements held under the Single Payment Scheme expire on the 31 December 2014 including
entitlements that are leased from one farmer (lessor) to another (lessee).
When carrying forward the value of leased entitlements to the Basic Payment Scheme in 2015, such value will be assigned to the owner of the entitlements (where he is eligible for an allocation of entitlements under the Basic Payment Scheme) and not to the lessee.
As noted previously (see condition 6 on page 13), there is a provision whereby persons may enter into a Private Contract Clause (PCC) where the lessor may lease out together with a part of the holding the corresponding payment entitlements that will be allocated in 2015.
Persons who Leased Out all Entitlements in 2013 and who do not have an ‘Allocation Right’
Where lessors have leased out all of their entitlements for a period which includes the 2013 scheme year (or leased out a portion of their entitlements but were not eligible to receive a direct payment in 2013 under the Single Payment Scheme, the Grassland Sheep Scheme, the Burren Farming for Conservation Programme or the Beef Data Programme) they will not have an automatic ‘allocation right’ and consequently would not have access to the Basic Payment Scheme in 2015. As a consequence, these 100% lessors will neither be eligible to establish entitlements in their own right, nor can they enter into a Private Contract Clause to transfer entitlements to the lessee.
The value of such leased entitlements will be lost to both lessor and lessee unless the entitlements in question are transferred permanently by sale or gift before 15 May 2014.
Such persons who do not have an ‘allocation right’ but who have leased out entitlements in 2014 may avoid this loss by reviewing their existing arrangements and entering into a permanent transfer of the entitlements under the 2014 scheme year, ideally to the existing lessee who is leasing the land. A permanent transfer involves the transfer of ‘ownership’ of the entitlements by way of sale or gift. The terms and conditions of such an agreement is solely a matter for the parties involved. Such a transfer involves the transfer of the entitlements only.
Transfer of Entitlements
The transfer of entitlements in 2015 will be restricted to those transfers which need to take place, i.e. inheritance, gift, change of legal entity, administrative transfer, partnerships and scission. Where eligible to do so, farmers may enter into an agreement before 15 May 2015 to transfer land either by way of sale or lease along with the associated Basic Payment Scheme entitlements by way of Private Contract Clause and the entitlements will be transferred to the purchaser/lessee in 2015. (See section on Private Contract Clause on page 13). The sale or lease of newly established Basic Payment Scheme entitlements will not be permitted in 2015 (unless by way of Private Contract Clause entered into before 15 May 2015).
From the 2016 scheme year, the transfer of entitlements will operate as normal where entitlements may be transferred within a Member State. However, with the exception of gift or inheritance, they may only be transferred to persons who meet the definition of ‘active farmer’. Additional flexibility is added in that entitlements may be leased out either with or without land.
Both the ‘Initial Unit Value’ of each entitlement and its subsequent value over the five years of the scheme will be calculated at the time of allocation and will be notified to the farmer. Where an entitlement is transferred, it retains its original ‘Initial Unit Value’ and its unique convergence path for each year of the scheme. Where a farmer leases in an entitlement with an ‘Initial Unit Value’ that is above 100% of the Basic Payment Scheme national average, he will see its value decrease over the five years of the scheme. Where a farmer leases in an entitlement with an ‘Initial Unit Value’ that is below 90% of the Basic Payment Scheme national average, he will see its value increase over the five years of the scheme.
No ‘claw-back’ will apply to any type of transfer.
The Number of entitlements to be allocated to a farmerTotal value of entitlements to be allocated to a farmerInitial Unit Value of entitlements (obtained by dividing the total value of entitlements by the number of entitlements)The process for calculating each of these values is outlined below.
Calculating the Number of Entitlements
As noted previously (see Reference Points on page 9), the number of entitlements that will be allocated to a farmer under the new Basic Payment Scheme will be based on;
The number of eligible hectares the farmer declares in 2013 and 2015, whichever is lowerFor example, if a farmer declares the following;
2013 |
50 hectares |
|---|
2015 |
Mandatory |
The number of entitlements allocated to this farmer in 2015 will be 40.
Number of Entitlements = Number of Hectares declared in 2013 and 2015, whichever is lower
Calculating the Value of Entitlements
The value of entitlements that will be allocated to a farmer in 2015 will be based on a fixed percentage of the value held by the farmer in 2014.
A farmer’s 2014 value consists of;
1. Total value of entitlements owned by the farmer in 2014 (including the value of
entitlements which the farmer has leased out in 2014)2. Total payment received by the farmer under the Grassland Sheep Scheme (if any)
A farmer who leases out entitlements in 2014 is considered to own those leased entitlements and the value of the leased entitlements will be assigned to the owner (lessor), not to the person who is leasing them in (the lessee).
As the Basic Payment ceiling forms only a percentage of the total 2014 value to be carried forward, only a percentage of the farmer’s 2014 value is carried forward to calculate the value of his/her entitlements in 2015.
For example:
2014 Value of Entitlements |
= €7,000.00 |
|---|
Entitlements leased out by the farmer |
|
2014 Grassland Sheep Scheme payment |
= €1,000.00 |
Total 2014 Value |
= €10,000.00 |
Estimated percentage carried forward |
= *60% |
Value used to establish entitlements in 2015 |
= €6,000.00 |
*It is estimated that approximately 60% of the value of entitlements held by a farmer under the Single
Payment Scheme and of the value of any payment the farmer receives under the Grassland Sheep Scheme
will be carried forward to the calculation of his total value of entitlements under the Basic Payment
Scheme. The exact percentage will not be known until 2015.
Calculating the Initial Unit Value
The ‘value’ that is carried forward from 2014 is spread across the ‘number’ of entitlements that is allocated to the farmer in 2015. This gives the farmer’s Initial Unit Value. The Initial Unit Value forms the basis of all subsequent convergence calculations for the value of those entitlements for each year of the scheme.
For example:
Number of Entitlements allocated in 2015 |
= 40 |
|---|
Value carried forward from 2014 |
= €6,000 |
Initial Unit Value |
= €150.00 (€6,000 divided by 40) |
Applying Internal Convergence
All entitlements held under the Basic Payment Scheme are subject to convergence.
In simple terms, those who hold entitlements with an Initial Unit Value that is above the Basic Payment Scheme national average will see the value of their entitlements decrease over the five years of the scheme while those with entitlements that have an Initial Unit Value that is below 90% of the Basic Payment Scheme national average will see the value of their entitlements increase gradually over the five years ofthe scheme. Those who hold entitlements that have an Initial Unit Value which is between 90% and 100% of the Basic Payment Scheme national average value will see no change.
There are three possible ‘convergence effects’;
Unit Value will Increase: A farmer whose ‘Initial Unit Value’ under the Basic Payment Scheme is below 90% of the Basic Payment Scheme national average value shall have his Initial Unit Valueincreased by one third of the difference between his ‘Initial Unit Value’ in 2015 and 90% of the Basic
Payment Scheme national average. This increase shall take place in five equal steps over the period 2015 to 2019.
Unit Value will remain unchanged: Where the Initial Unit Value held by a farmer is between 90% and 100% of the Basic Payment Scheme national average, the Unit Value of entitlements will remain unchanged.Unit Value will decrease: Where the ‘Initial Unit Value’ is above 100% of the Basic Payment Scheme national average, the value of such entitlements which is in excess of 100% of the Basic Payment Scheme national average will be reduced over the five years by whatever amount is required to fund the increase for those below 90% of the Basic Payment Scheme national average.The entire process of ‘convergence’ is based on the setting of a Basic Payment Scheme national average. The Basic Payment Scheme national average cannot be calculated until all land is declared and accepted as eligible under the 2015 scheme year. At this stage it is not possible to confirm the Basic Payment Scheme national average nor to identify those farmers who will be above or below that value.
Minimum Value by 2019
In addition to the standard level of convergence outlined above, a further test is applied whereby all
farmers must reach a minimum entitlement value of 60% of the Basic Payment Scheme national average by 2019. If a farmer does not reach 60% under the standard convergence, then the value of his entitlements will be increased in equal steps to ensure that by 2019 that level is reached.
Maximum Value by 2019
By 2019 no farmer may receive a payment per hectare (Basic Payment and Greening) of more than €700.00.
Farmers who hold entitlements with an Initial Unit Value that is above 100% of the Basic Payment Scheme national average will be converged downwards over the five years of the scheme. However if by 2019 they still receive a payment per hectare which is greater than €700, they will be further adjusted downwards so that their payment per hectare is not greater than €700. The test for this ‘maximum value’ therefore is not applied gradually over the five years of the scheme but only as a once-off adjustment in 2019.
Notification of Entitlement Value
The calculation of the value of entitlements under the Basic Payment Scheme cannot be undertaken until all land is declared and accepted as eligible in 2015. The number of eligible hectares in 2015 is required to calculate the ‘Basic Payment Scheme national average entitlement value’ around which the entire process of convergence is based. It is intended that a provisional statement of entitlements will issue in 2015 and that a definitive statement of entitlements will issue before April 2016.
Calculation of Entitlement Value for Sample Farmer
There are five steps involved in calculating a farmer’s payment under the new scheme;
1. Calculate number of entitlements2. Calculate total value of entitlements3. Calculate the Initial Unit Value4. Calculate convergence for each year from 2015 to 20195. Apply 60% Minimum Payment testThe following example is based on a sample farmer with a profile as outlined in the table on the left. The ‘national average entitlement value’ is estimated as outlined in the table on the right.
The following calculations would apply to this farmer in 2015;
Step 1: Calculate Number of Entitlements
Lesser of hectares declared in 2013 and 2015
Number of entitlements = 40
Step 2: Calculate Total Value of Entitlements in 2015
Value carried forward from 2014 (approx. 60% of €4,200.00)
Total Value of Entitlements in 2015 = €2,520.00
Step 3: Calculate Initial Unit Value in 2015
Total Value (€2,520.00) divided by Number of Entitlements (40)
Initial Unit Value = €63.00
Step 4: Apply Convergence
Difference between 90% Basic Payment Scheme average and
Initial Unit Value (€153-€63) = €90
1/3 of the difference = €30
Annual increase in Entitlement value (€30/5 years) = €6.00
2015 Entitlement value (€63 + €6.00) = €69
2016 Entitlement Value (€69 + €6.00) =€75
2017 Entitlement Value (€75 + €6.00) =€81
2018 Entitlement Value (€81 + €6.00) =€87
2019 Entitlement value (€87 + €6.00) = €93.00
Step 5: Apply 60% Minimum Value Test
60% Minimum of national average (60% of €170) = €102.00
At a unit value of €93.00, this farmer has not reached 60% minimum by 2019
Instead of an increase of €6.00, the farmer needs an annual increase of €7.80 to arrive
at €102.00 by 2019 = €7.80
2015 Revised entitlement value = €70.80
2019 Revised entitlement value = €102.00
Note that this farmer would also receive a Greening payment which will be calculated as a fixed percentage of the entitlements activated under the Basic Payment Scheme. If eligible, he may also receive an additional payment as part of the Young Farmers Scheme and a payment under the Coupled Support for Protein Crops.
For a farmer whose Initial Unit Value is above the Basic Payment Scheme national average, steps 1 to 3 will be applied in the same manner as outlined above. However such a farmer’s Initial Unit Value will be reduced each year. The reduction is applied only to the amount that is over 100% of the Basic Payment Scheme national average and will be based on the amount needed to fund the increase in the value of those farmers whose Initial Unit Value is below 90% of the Basic Payment Scheme national average.
The figures used above are based on estimates only and are solely for the purposes of illustration. The Basic Payment Scheme national average may be higher or lower than the figures presented depending on the overall number of eligible hectares declared in 2015.
Note on the Status of Leased Entitlements
All entitlements held under the Single Payment Scheme expire on the 31 December 2014 including
entitlements that are leased from one farmer (lessor) to another (lessee).
When carrying forward the value of leased entitlements to the Basic Payment Scheme in 2015, such value will be assigned to the owner of the entitlements (where he is eligible for an allocation of entitlements under the Basic Payment Scheme) and not to the lessee.
As noted previously (see condition 6 on page 13), there is a provision whereby persons may enter into a Private Contract Clause (PCC) where the lessor may lease out together with a part of the holding the corresponding payment entitlements that will be allocated in 2015.
Persons who Leased Out all Entitlements in 2013 and who do not have an ‘Allocation Right’
Where lessors have leased out all of their entitlements for a period which includes the 2013 scheme year (or leased out a portion of their entitlements but were not eligible to receive a direct payment in 2013 under the Single Payment Scheme, the Grassland Sheep Scheme, the Burren Farming for Conservation Programme or the Beef Data Programme) they will not have an automatic ‘allocation right’ and consequently would not have access to the Basic Payment Scheme in 2015. As a consequence, these 100% lessors will neither be eligible to establish entitlements in their own right, nor can they enter into a Private Contract Clause to transfer entitlements to the lessee.
The value of such leased entitlements will be lost to both lessor and lessee unless the entitlements in question are transferred permanently by sale or gift before 15 May 2014.
Such persons who do not have an ‘allocation right’ but who have leased out entitlements in 2014 may avoid this loss by reviewing their existing arrangements and entering into a permanent transfer of the entitlements under the 2014 scheme year, ideally to the existing lessee who is leasing the land. A permanent transfer involves the transfer of ‘ownership’ of the entitlements by way of sale or gift. The terms and conditions of such an agreement is solely a matter for the parties involved. Such a transfer involves the transfer of the entitlements only.
Transfer of Entitlements
The transfer of entitlements in 2015 will be restricted to those transfers which need to take place, i.e. inheritance, gift, change of legal entity, administrative transfer, partnerships and scission. Where eligible to do so, farmers may enter into an agreement before 15 May 2015 to transfer land either by way of sale or lease along with the associated Basic Payment Scheme entitlements by way of Private Contract Clause and the entitlements will be transferred to the purchaser/lessee in 2015. (See section on Private Contract Clause on page 13). The sale or lease of newly established Basic Payment Scheme entitlements will not be permitted in 2015 (unless by way of Private Contract Clause entered into before 15 May 2015).
From the 2016 scheme year, the transfer of entitlements will operate as normal where entitlements may be transferred within a Member State. However, with the exception of gift or inheritance, they may only be transferred to persons who meet the definition of ‘active farmer’. Additional flexibility is added in that entitlements may be leased out either with or without land.
Both the ‘Initial Unit Value’ of each entitlement and its subsequent value over the five years of the scheme will be calculated at the time of allocation and will be notified to the farmer. Where an entitlement is transferred, it retains its original ‘Initial Unit Value’ and its unique convergence path for each year of the scheme. Where a farmer leases in an entitlement with an ‘Initial Unit Value’ that is above 100% of the Basic Payment Scheme national average, he will see its value decrease over the five years of the scheme. Where a farmer leases in an entitlement with an ‘Initial Unit Value’ that is below 90% of the Basic Payment Scheme national average, he will see its value increase over the five years of the scheme.
No ‘claw-back’ will apply to any type of transfer.
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