However, the introductions of the new Basic Income Support Scheme (BISS) and the Eco Scheme have heralded a number of important changes.

These have prompted a lot of queries from people leasing out their land and entitlements.

The are asking whether the payment they receive will be impacted by the new scheme, as compared to the outgoing Basic Payment Scheme.

Many people are concerned that leasing their entitlements will mean they will eventually lose them.

Here, I explain how the regulations have changed and outline the precautions you should take when drawing up a lease

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Leasing entitlements with land

The vast majority of entitlements that are leased go hand in hand with a land lease.

In this case, it is essential that the entitlements are included in the lease agreement, to ensure that the rent from the entitlements qualifies for the tax exemption.

The lease should also contain written provisions to address such matters as ensuring that the landowner does not suffer as a result of any penalties incurred by the tenant’s non-compliance with the rules

, and that the landowner is not unduly disadvantaged by future scheme changes during the term of the lease.

For example, the nature of the payment may change to a direct area-based payment that benefited the tenant and not the landowner. The lease should contain a paragraph that covers such an eventuality.

It is impossible to say if the option to lease entitlements will be there beyond the current scheme, but it will be there for the duration of this scheme, which will definitely last for five years — and possibly longer, given the duration of the BPS.

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Rent likely to be received

Uup to now landowners have generally received 100pc of the payment that their entitlements generated for the tenant.

While this may continue to be the case, it is unlikely that the landowner will receive as much as if they had farmed the entitlements themselves.

Under the new scheme rules, many tenants will already be farming the required 30ha (74ac) to achieve the maximum payment under CRISS, which is worth up to €43/ha or €1,290 in total. So the landowner is likely to be at the loss of that payment.

In addition, some tenants may not wish to participate in the Eco Scheme, which is worth on average approximately €65/ha.

Alternatively, tenants who do intend to participate in the Eco Scheme may wish to recover some of the compliance cost they incur and may not be willing to pay over the full amount they receive.

Many entitlements will be reduced in value over the next five years due to the convergence measures. So landowners leasing out their entitlements with land can expect to receive less than they received up to 2022 — and substantially less in some cases.

How much less will depend on the unit payment value of their entitlements and whether their tenant is in receipt of CRISS or the Eco Scheme.

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Leasing entitlements without land

As with the BPS, it is possible for a farmer to lease out his or her entitlements without land.

Clearly in such cases the owner of the entitlements will have to forfeit some of the payment received, which typically is 40-60pc, depending on the value of the entitlements.

Rents from such leases will be similarly impacted by the convergence measures along with CRISS and the Eco Scheme.

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Tax relief

Rent paid for entitlements qualifies for the tax exemption along with the land, provided that the entitlements are part and parcel of the land lease, which must be for a minimum term of five years.

The entitlements should be transferred from the owner to the farmer by way of the Department’s online facility and must be for the term of the lease if the tax exemption is to extend to the rent of the entitlements.

This transfer can only be done by the farmer or his Department-approved farm advisor/consultant.

The tax exemption to cover both land and entitlement rent is up to €18,000 for a five-year lease, €22,500 for a seven-year lease, €30,000 for a 10-year lease and €40,000 for a 15-year lease.

The limits are doubled where the land is held in joint ownership.

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Preparing a lease

Landowners, especially those with entitlements to lease. should seek the assistance of their advisor/consultant when preparing a lease. Doing up a lease yourself is asking for trouble down the line.

Everything needs to be clear from the outset in terms of what rent the tenant must pay and the landowner will expect from his leased entitlements.

The Eco Scheme and CRISS, along with the convergence measures, have complicated matters, so it is vital that both tenant and landowner are clear on what they have agreed if disputes are to be avoided when the gale day arrives.

Martin O’Sullivan is the author of the ACA Farmers’ Handbook and is a farm business and tax consultant based in Carrick-on-Suir; www.som.ie