Capital Grant and Sustainable Farming Incentive update

Posted on by artheyassociates

Capital Grants Update – What You Need to Know?

The government recently announced it has allocated £5 billion of funding to support farming and environmental initiatives over the next two years. However, whilst we wait for further details on how that support will be allocated, we are told by the RPA that the sheer demand for grants this year has led to some changes, particularly affecting standalone Capital Grants. 

The Current Situation

On the 27th November the RPA paused applications for 76 standalone capital grant items. This decision was implemented with very little warning and was driven by a supposed overwhelming demand, with applications between May and November 2024 alone valued at 42% more than in the previous financial year. The high demand has led to spending levels that are deemed not sustainable for the year and will result in giving more to capital grants this year than ever before. The RPA has forecast that there will be 49% more spent on capital grants this year than there was last year, and 125% more than in 2022/23.

What Can You Still Apply For?

Applications remain open for specific grants, including:

  • Woodland Tree Health Grants to help address pests and diseases.
  • Capital and Management Plans to support Countryside Stewardship Higher Tier agreements.
  • Protection and Infrastructure Grants and Higher Tier Capital Grants, such as peatland re-wetting.

If you’ve already submitted an application for a grant item that is no longer available, your application will be on hold. The RPA has promised updates in early 2025.

Payments for capital works in existing agreements are unaffected and will continue as planned.

What’s Next?

The RPA plans to relaunch the standalone Capital Grants scheme in 2025, with a simplified application process, which will likely include revised eligibility and streamlined guidance. It is possible that payment rates will also be revised, and the availability of certain capital grant options may also be affected.    

SFI Scheme Expanded Offer – Our Guide

Earlier this year, the Sustainable Farm Incentive had its second reform and with it the new SFI handbook was published, introducing an ‘expanded offer’ with 102 options.  

The extended offer includes 57 options carried over from Countryside Stewardship (CS), with only eight of these retain their 5-year term. The majority are now set at three years. Additionally, there are 23 new options focusing on precision farming, agroforestry, and stone walls.

You have the freedom to choose which actions to take and how much to include in your SFI agreement. While some actions come with area constraints, most can be applied to part or all of a parcel. However, actions like soil assessment and testing require a whole parcel only approach, being applied to the available area after removing incompatible sections.

For every SFI action, you’ll find clear eligibility requirements, payment rates, and instructions on what you must or must not do. These are designed to be flexible, allowing you to adapt them to your farm. For instance, seed mixes can be tailored to your soil type. The system will also identify where actions can be stacked for a greater impact.

Additional Payments

On top of payments for SFI actions, there’s a management payment:

  • First year: £40/ha for the first 50 hectares in your agreement.
  • Subsequent years: Reduced to £20/ha for the same 50 hectares.

It’s worth noting this is based on the area under option in your agreement, and only one management payment is available per SBI.

Actions with Area Limits

Defra has restricted the combined area of ten specific actions to 25% of the farmed land. This limit applies across all SFI agreements linked to the holding from 26 March 2024.

The limited actions include:

  • CIPM2: Flower-rich grass margins or blocks.
  • CAHL1: Pollen and nectar flower mix.
  • CAHL2: Winter bird food on arable land.
  • CAHL3: Grassy field corners or blocks
  • CIGL1: Take improved grassland field corners or blocks out of management
  • CIGL2: Winter bird food on improved grassland
  • WBD3: In-field grass strips
  • AHW1: Bumblebird mix
  • AHW9: Unharvested cereal headland
  • AHW11: Cultivated areas for arable plants

Eligibility

To be eligible for SFI, you must have management control of the land and meet the requirements for each action. For example, arable actions require the land to be recorded as arable on the Rural Payments system and so on.

Tenants can apply for SFI without their landlord’s consent (subject to tenancy terms) but must have confidence in maintaining management control for the three-year term. Even tenants on short-term rolling agreements can participate, and Defra has introduced a lenient penalty regime if land unexpectedly needs to be withdrawn.

Agreement Management

The agreement length mirrors the longest action included—usually three or five years. Applications are managed online, with a rolling window and agreements starting on the 1st of the following month.

Payments are made quarterly, beginning in the fourth month after your agreement starts. To receive the final quarterly payment each year, you must complete an annual declaration confirming you’ve delivered the actions.

While you can’t add new actions to an existing agreement, you can adjust the areas of rotational actions annually. For example, in year one, you might claim 10ha; in year two, reduce this to 5ha, and in year three, increase it to 11ha (up to 50% of the initial area).

It’s possible to run multiple SFI agreements on the same land, provided the actions are compatible. However, agreements can’t be transferred, and early termination may require repayment.

Mixing Schemes

You can combine SFI actions with other schemes like Countryside Stewardship or Environmental Stewardship, provided there’s no double funding. The RPA’s system automatically calculates compatible areas. Additionally, land receiving private finance (e.g., carbon payments) can be entered into an SFI agreement, though it is thought Defra is reviewing this policy.

Existing CS Mid-Tier, Higher-Tier, or HLS Agreements

From September 2024, farmers with existing CS Mid-Tier or HLS agreements can end these early to apply for an SFI agreements. Options include ending the agreement either:

  1. At the end of the current year and receiving full payment for the year.
  2. Before the year ends, ultimately forfeiting payment for the part-year already completed.

Our Final Thoughts

We believe the SFI combined offer is a great choice because it’s flexible, easy to use, and comes with good financial support. Farmers can pick the actions that work best for their farm, change rotational action areas year-on-year, and get quarterly payments with extra bonuses in the first year. It’s simple to apply, works well for tenants, and can be combined with other schemes. 

If you would like to enter into a Sustainable farming agreement but would like some advice and support as to how to go about this, we would love to hear from you, and would be happy to offer our assistance in creating the right agreement for your farm.

Please contact our environmental schemes and grants specialist Tom Wilson via twilson@artheyassociates.co.uk or 07590 444723.