19 June 1998

French quota ruling sounds alarm bells

By JeremyHunt

QUOTA holders who no longer produce milk may have to return their quota to the national reserve, according to a recent French ruling.

There continues to be considerable confusion over the definition of a "producer" in relation to milk quota law, London barrister Martin Rodger told a recent meeting of the Central Association of Agricultural Valuers.

A recent case in the European Court concerned a French producer who had voluntarily ceased milk production but retained his quota. He had then sought compensation on the outgoer scheme. The court ruled that anyone who had spontaneously ceased milk production was no longer a producer.

"The suggestion by the European Court that the milk quota of a producer who spontaneously discontinues production must be returned to the national reserve is likely to sound alarm bells in many redundant and mothballed milking parlours across Europe," said Mr Rodger.

But non-producing quota holders should be able to avoid the problem by claiming "legitimate expectation", says Charles Holt of the Farm Consultancy Group. That defence was used by SLOM producers who wanted to resume milk production, but were prevented initially from doing so because they had no quota allocation.

Others, especially those with no farm, could form a contract with a producer and take a share of the profits in return for the quota.

Producers must consider retirement relief restrictions before selling quota, valuer Mark Webb of Wilts-based agents Lovedays told the meeting. "The point of retirement is the day on which milk production ceases. A producer is not entitled to retirement tax relief on the proceeds from the sale of his quota if any is sold beforehand."

Referring to the topical issue of quota transfers without land, Mr Webb said producers must be aware about the restrictions imposed on this type of transfer. "A producer acquiring quota without land can neither lease out or sell any of that quota during the rest of that quota year or the year after." &#42