Image: The unassuming entrance to the HQ of the UK’s largest farm

The largest farm in the UK is popularly understood to be that owned by the Co-operative Group which extends to 17,808 acres across the country and is currently up for sale. However, figures released by the Scottish Government show that, in fact a north-east farmer, Frank A Smart is now far and away the largest farmer in the whole of the UK. In 2013, Mr Smart was farming 87,423 acres of land across Scotland – almost five times more than the Co-operative Group. For his efforts, he was paid £3,226,492 by the Scottish Government. His company’s accounts record a profit of £552,655 for the year ending 30 September 2012.

Mr Smart is the King of the Slipper Farmers. By buying “entitlements” to farm subsidies of thousands of pounds per hectare and claiming these on the basis of bogs and mountains rented at around £5 per acre – “naked acres”, he has abused the system of farm subsidies and become a millionaire.

According to the farming journalist Andrew Arbuckle, slipper farming has been responsible for between £50 – £100 million of payments each year – almost 20% of the total amount of subsidy paid to Scottish agriculture. Some of Scotland’s leading charities joined in the scam – here is the National Trust for Scotland trying to explain away its own involvement in buying entitlements and leasing naked acres.

The new system of farm subsidies to be introduced in 2015 is meant to bring an end to slipper-farming by ensuring that all farmers are “active”. The definition of this is yet to be finalised, however, and it is far from clear whether this will be effective in eliminating this abuse. Matters are further complicated by uncertainty over whether the new system will be introduced in 2015 as a fresh start or whether it will be phased in over a number of years. The latter approach may well allow slipper farmers like Frank Smart to continue receiving millions of pounds per year for doing probably very little at all. Moreover, it would be a slap in the face to those many farmers across Scotland for whom, because the current system was designed to benefit those farming in 2003, have been running their businesses with no subsidy whatsoever

Last week, the Rural Affairs, Climate Change and Environment Committee wrote to Richard Lochhead and argued that an immediate move to the new system may have a “negative impact on Scotland’s agriculture sector which could have serious and economic and social impacts.” It argues this position on the ludicrous proposition that “some businesses”, despite having known for years that this change was going to happen, “may not be prepared”. (page 6 of the letter & Committee Inquiry page).

Sorry – but if these businesses (and, coincidentally, they are ones that seem to dominate the concerns of the National Farmers Union of Scotland) are not prepared, then that’s tough. Why should public money be paid out to to anyone on the basis of what they were given a decade ago and who has failed to prepare for change?

Apart from Scotland’s specialised farming press and a programme on Panorama broadcast in March 2012, the mainstream media has not paid much attention to this issue. One recent exception, interestingly is the New York Times which carried a story titled “In Scotland, Working both the Land and a Loophole” by Stephen Castle on 31 March 2014.

Meanwhile, the concerns of the Committee and of the Scottish Government will be evidenced by whether Mr Smart continues to receive millions of pounds of public money that should, instead, be supporting Scotland’s far more deserving active and enterprising farm businesses.

26 Comments

  1. Andy, I think frank smart was a millionaire before.
    If he was claiming £3million annually, he will have spent probably £7 million to buy the entitlements he needed .

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    • by year 3 he’s well on his way to a 30% return. Wish I knew a bookie who would give me odds like that. Could he write the 7 million off against tax in the first place?

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      • “Entitlements” are “intangible assets” and can be written off against income for tax purposes.

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        • They may be intangible but surely the entitlements would be capital expenditure and therefore can’t be written off against the income they produce?

          SFP entitlements are like shares in a company – you can’t write the capital cost of buying the shares against the income produced by the dividend they yield. You can only write the capital cost of acquisition off against the capital gain realised on sale.

          How much are SFPEs worth (in capital terms) at present. Not much I would have thought but could be wrong depending on the fine print of the CAP Reform. Interesting subject.

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          • To clarify – SFP is an intangible asset for corporate farmers and tax relief is available for their annual depreciation.

  2. He’d have probabally paid them of in around three years. Been doing it for longer than that. Likely been using income to purchase more as time went on. Doe’s my heart bleed? No. Do I bear a grudge also no.

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  3. Hugh Chalmere

    Hi Andy, on the button as ever, excuse this request on your blog, – do you want to do a slot at the reforesting Scotland gathering at kyleakin on 4 th October ? Land use and abuse on Skye .

    At hug

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  4. What we need to remember here is that there is no net loss to the taxpayer.
    The entitlements were sold by cash strapped or evicted tenant farmers to the likes of frank smart who has done rather nicely.
    Without the ability to trade entitlements, said farmers would have been in a worse position, and their landlords would have cleaned up as usual.

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  5. Andy,

    I agree that the system is unfit and you’re right to point out the faults but I feel like the constant harassment of Mr Smart is unwarranted. He is producing cattle and crops and is as active as any farmer in Scotland.

    The people who should be targeted are the people collecting AGRICULTURAL SUBSIDY payments for sitting in an office in Edinburgh, or maybe the various “Charitable Companies” that claim as well as the various royals on the list?

    The World Trade Organisation and the EU both insist that entitlements are able to be claimed on non agricultural land and claimable by people who have never seen a sheep.

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  6. All very well saying he is a farmer – but only in a miniscule way to the amount of subby he collects – hes no different to the office based speculators.
    If they go with a gradual change and as long as these guys meet minimum stocking density requirements it is quite possible that they could collect £1000/ewe of subsidy – which is of course ridiculous. Scotgov has been warned about the potential of this happening – at least with a quick change the most they could collect would be £75/ewe from which they would have to take off shepherding costs and sheep purchase etc – hardly worth it for the hassle – but if you will get ten times that then by god I certainly would be doing it.

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    • You’re bang on, unfortunately the big winners from last time stand to be the big losers this time so guess who’s shouting loudest. The system is wrong but hopefully we can get a minimum stocking density so there has to be farming to trigger a payment.
      Whether or not the EU allow it is a different story…

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    • He is more of a farmer than most estate owners who hoover the majority of subsidy via the rack rent.

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  7. Responding to Andy on May 12, 2014 at 10:25 pm (“To clarify – SFP is an intangible asset for corporate farmers and tax relief is available for their annual depreciation.”)

    Are you saying HMRC accepts SFPE as a depreciable asset for Corporation Tax purposes?

    What’s the position for non-corporate farmers? Is the depreciation allowable against IT?

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    • Slurry Stirrer

      i remember talking a bout the merits of capping CAP at an NFU meeting 5 years ago and was laughed at. A vice president was there at the time and he tried to explain how the world is starving and we need very big farms to produce this food. Also the threat of loosing this money. i believe the opposite is true, i think we would be far more productive with many more people farming across the country, and i think it will actually secure our payments by moving away from the monopoly trap and massive payment per farmer/low payment per hectare we have.
      p.s. i thought entitlements could be written against tax only by the acquisition of further entitlements??

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  8. SS, is your point that continued subsidy would be more acceptable to Joe Public, and thus more likely to continue, if it were seen to be supporting a mosaic of smaller farmers rather than “big ag”?

    There seems to be very different tax treatment of SFPEs for companies (Corporation Tax) as opposed to sole traders/partnerships (Income Tax). The former seem to be able to write off depreciation of SFPEs whereas the latter don’t. Doesn’t seem very fair, does it …

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    • Slurry Stirrer

      NK, yes, i suppose there is so much that is subsidiesed, what can be of greater importance than food? To secure continued production at a level which provides good quality healthy food. The main problem with uncapped subsidy is the negative effect it has on rural populations, farmers acquire more and more land and the farm house is sold off as a holiday home. Ghost farms as i call them. And lets face it some of these Agri Business farmers are now extremely wealthy. Subsidies are there to allow the taxpayers to ultimately benefit from the payments and therefore they should be targeted to avoid a few from getting far too rich.

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  9. “Frank A Smart” must be a made up name like “Frank N Furter”

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  10. did you know that if they changed the system over to area based from day one and included redistribution payments then 75% of Scottish farmers would be the same or better off? Did you know that the sector whose leaders are screaming the most – the specialist beef sector – over 70% of their farmers would be better off with a quick changeover. Who stands to gain – the slipper farmers who put off most of their stock , the big beef guys that worked the last system and of course the speculators.
    If you want to at least go a step of the way of getting rid of these hangers on plus spread the jam a bit more fairly across the country then they have to get onto the new area system as quickly as possible from day one.

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    • Dave, if there were no tenant farmers you would be right, but there are large numbers of tenant farmers who will lose their farms because of the shift to area payments.
      Those that dont lose the land will have the payments siphoned off by rent increases anyway.

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      • other than seasonal grazings – where that will happen certainly in the 1st year so that landlords can activate entitlements, after that it will be business as usual with the landlord taking the sub and graziers renting the let and carrying out the farming activity – it is the same as at present for seasonal grazings really.
        All existing tenancy agreements stand , so unless you are unlucky and have an SLDT or LDT coming to end this year then it shouldn’t affect you as the arrangements for claiming subby will be the same as at present under your tenancy agreement.
        Again the justification for rent rises are no different to now – so no change there either.
        If Scotgov really wanted to make a difference they could insert and active farmer clause that stipulates that the claimant must shoulder the physical and financial risk of the farming activity carried out on the land claimed. That would be the only way to get the sub going back to the farmer rather than the landowner. (no doubt there are ways round that and I don’t know if euro rules allow it)

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        • Dave , the real world is rather different. Tenants are already being tipped out.
          More will be tipped out over the next couple of years.
          The only thing that stops evictions is a historic payment belonging to the tenant.

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  11. Hebridean Farmer

    There lies the problem Dave….. you say …”Again the justification for rent rises are no different to now – so no change there either.”
    Yes, I’m afraid there is a change…….. made by Lord Gill, he ruled that SFP may be taken into account in farm rents.
    You are correct Hector, “land will have the payments siphoned off by rent increases “

    Reply

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