New Red Tractor assurance rules for arable businesses with contract farming agreements (CFAs) in place are now in force, with farmers urged to check they are compliant to avoid problems selling grain.
The rules, which have been phased in over the past 13 months, affect members of the combinable crops and sugar beet schemes.
From 1 Dec 2019, new membership arrangements came into effect for contract farmers who carry out all the day-to-day farm management on behalf of a landowner.
In instances where all farm operations are carried out by the contractor, including marketing the crop, the contractor must be fully certified under their own Red Tractor membership.
Landowners selling a crop that has been grown or managed by a contractor are now required, as a minimum, to have an ‘owner’ membership that links to the contractor’s full RT membership.
It should also be noted that the Red Tractor Assurance membership must be in the same trading name as the business receiving payment for the grain.
The new rules only apply to contract farmers who are responsible for the day-to-day farm management on behalf of a landowner, not businesses that are simply providing ad-hoc services to arable farms, such as contract spraying.
For more information, members can contact their certification body directly or email Red Tractor at email@example.com or call 020 7630 3320.
The question of how much management responsibility lies with the farmer and how much with the contractor also has tax implications.
Mark Chatterton of accountant Duncan & Toplis warns that HMRC expects landowners with contract farming agreements to be able to demonstrate that they are involved in the decision making and are exposed to financial risk.
This is a requirement in order to prove they are a working farmer, which means they retain eligibility for agricultural property relief and other tax benefits, including regarding income tax.
“You have to document that the landowner is making the decisions, they decide on the cropping, they insure the crop and they either sell the crop themselves, or sell the standing crop to the contractor at 30 June,” he said.