Up to and including 2004 farmers growing cereals, oilseeds and
proteins could claim subsidies under the Arable Area Payments
Scheme. In order to qualify, they were required to set aside a
percentage of the total area on which they are claiming and they
are paid compensation for the area set aside.
The timing of recognition of payments under the scheme was
considered in an article in Tax Bulletin, Issue 10 (February 1994).
It stated that we would accept accounts in which Arable Area
Payments were recognised as income of the accounting period to the
extent that the crop has been sold by the balance sheet date.
Where this approach has been adopted and the deemed cost
method of valuation described in Section 7.3 of BEN 19 (see
BIM55410) has been used, valuations
should be based on 75% of the total of the market value at the
valuation date plus the related Arable Area Payments (including
payments in respect of the required level of set-aside). The Area
Payments should also be taken into account when net realisable
value is computed.
The Tax Bulletin article included the following example. The
figures used are hypothetical and do not relate to any particular
arable crop.
Maggie is a farmer. She grows 85 hectares of an eligible
arable crop and sets aside an additional 15 hectares which is the
requirement for rotational set-aside. She accounts to 30 September
by which time the harvest of 500 tons has been gathered, half of it
has been sold off the combine at £88 per ton and half is in
store. The open market value of the crop in store at 30 September
is £90 per ton and stock is valued in accordance with the
deemed cost method described in Section 7 of BEN 19. Maggie expects
to receive Arable Area Payments of £200 per hectare for the
crop and £300 per hectare for the set-aside land making a
total of £21,500 but it has not yet been paid.
The accounts will include the following figures:
Sales and Arable Area Payments: £32,750 [(250 x
£88) plus (1/2 x £21,500)].
Stock (250 tons): £24,937 [75% x ((250 x £90) plus
(250/500 x £21,500))].
