Rural Payments and Services

Farmers and crofters who are waiting for their 2016 payment under the Less Favoured Areas Support Scheme (LFASS) will be offered a Scottish Government funded loan.

Rural Economy Secretary Fergus Ewing confirmed this will provide around £50 million support to businesses operating in Scotland's most marginalised and remote areas. The loans aim to provide financial security for farmers and crofters until the EU payments are made later this year and potentially boost the wider rural economy.

Further details of this loan scheme can be found below.

Table of Contents

• Questions and answers
• Scheme terms and conditions

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Q. Why is there need for a loan scheme?

A. In advance of your LFASS 2016 claim being processed, the Scottish Government wants to ensure that you have funding available to support your business and to give you some financial certainty during the process.

Q. Why are you calling it a loan when it's an advance on what I am due?

A. There are specific EU rules around advance payments which at this stage of processing 2016 claims would mean we could not make advance payments.
Therefore, we are making the offer of loans from domestic funding which is not constrained by EU rules.

Q. When will I receive my NLFASS loan offer letter?

A. We will be sending out NLFASS offer letters in batches, reflecting the large total number of LFASS claimants. The first offers will start to be sent from the 21 April and will continue to be issued over the following days as claim eligibility is confirmed. If you are concerned about not receiving your offer letter please contact the Customer Information Line on 0300 300 2222.

Q. What happens if I miss the application deadline?

A. You will still be able to enter the loan scheme, however we cannot guarantee when this payment will be processed. To avoid this, you should respond as soon as possible.

Q. What if I didn’t receive a letter?

A. Letters will be sent from the 21 April and will continue to be issued to businesses as claim eligibility is confirmed.
We will write separately to any applicants who we believe are not eligible for an LFASS 2016 loan payment to explain why this is the case.

Q. What if I don’t want a loan?

A. If you do not wish to accept the offer you do not need to take any action.

Q. What happens if I change my mind?

A. Please contact us as soon as possible by phoning 0300 300 2222 or emailing nationalLFASSScheme@gov.scot. A closing date will be announced in the summer, after which applications will no longer be accepted.

Q. Where can I get help and support?

A. Customers can contact the RPID Customer Information Line on 0300 300 2222 or email nationalLFASSScheme@gov.scot

Q. Who can accept the terms of the 2016 National LFASS Scheme?

A. The loan offer is being made to the business. In the majority of cases, it will be a member of the business who signs and accepts the conditions of the loan. If the business member is not able to sign the opt-in form, then it can be signed by someone who holds the required authority from the business member(s) and accepts the responsibility for receiving the loan. The existing mandates held by us do not extend to loan payments.

Q. When will farmers see more detail on the scheme and when will they be able to apply?

A. Details are set out in the offer letters that re being issued. In line with the approach taken to the BPS 2016 loan scheme, the LFASS 2016 scheme will be an “opt in” scheme. This means that those wishing to apply for a loan will need to reply promptly once the Government has written to them, indicating that they wish to apply. Clear guidance will be provided to support those wishing to apply for a loan.

Q. When will farmers receive their loan payments?

A. We expect to make loan payments before the end of May to those who apply before the deadline included in their letter.

Q. How much will farmers receive?

A. We will take a similar approach to the LFASS 2015 scheme. This means that many businesses will be offered a loan of 90 per cent of their anticipated 2016 LFASS payment. Others will be offered less on a sliding scale, based on similar factors to those used in the 2015 scheme, such as the extent of change in their land since 2015.

Q. How many farmers are eligible?

A. The full extent of eligible businesses is still being confirmed, but we expect this to remain at around the same level as the 2015 loan scheme when offers were made to approximately 11,500 businesses.

Q. Will anyone not be eligible for a loan?

A. It is likely that a small number of applicants will not be in a position to be offered a loan. This was the case for the 2015 LFASS loan scheme too.

Q. How will loan values be calculated?

A. As for the 2015 LFASS loan scheme, this will be calculated on the basis of claimants' previous year's payment and changes in the amount of land for which they have claimed for 2016.

Q. What about those who have not had their LFASS 2015 payments verified, processed and paid?

A. We are reviewing the detailed data held about claimants in this position to ‎establish an appropriate and robust means for calculating what loans may be offered. We hope there will be limited impact for most claimants in terms of the value of loans offered.

Q. How will loans be repaid?

A. The value of loans will be deducted from the claimant's 2016 LFASS payment once that has been made.‎ This is the approach taken to the LFASS 2015 scheme and the BPS loan schemes.

Q. Will I have to pay interest?

A. No. Where loans are fully recovered, the Scottish Government will meet interest costs in compliance with state aid rules. Further information will be provided in the loan offer letter.

Q. What are the state aid rules and do they affect me?

A. State aid rules are set and controlled by the European Commission. They apply to all forms of public funding and Member States are legally obligated to observe them. There are many different State Aid regulations. The regulation which applies in this instance is 1408/2013 which is the Agricultural De-Minimis Regulation.

This allows farmers to receive €15,000 from any public source over a three-year fiscal rolling period.

The state aid element of your NBPSS payment is the notional interest and not the actual payment amount. It is your responsibility to make sure that you do not breach the state aid limit.
By accepting the funding, you are declaring that you have not exceeded the de minimis threshold. Failure to do so could result in the funding being recovered with interest by the European Commission.

We will send you a letter detailing the amount of state aid benefit you have had in the form of interest from the scheme once your 2016 LFASS payment has been made.

Some examples of schemes which come under de minimis rules are:

• Bull Hire Scheme
• Sea Eagle Scheme
• Rural Priorities Outcome Plan
• AECS Farm Environmental Assessment Payment
• New Entrants and Others 2013
• Weather Aid Scheme 2013
• BVD Check Payments
• Fallen Stock Fund
• Fox Control Scheme
• Biofuels Programme
• Resource Efficient Scotland
• Clyde and Avon Valley Tree Planting Scheme
• Dairy Farmer Island Concession Scheme
• Weather Impact Support Scheme for Westray Farmers
• Cash Flow Loan Scheme
• 2015 National LFASS Scheme
• 2015 National BPS Scheme
• 2016 National BPS Scheme

This list is not exhaustive and other schemes may also be subject to de minimis.

Q. Will you allow for more time if a loan repayment can’t be made within seven days?

A. State Aid regulations require us to charge interest on any outstanding balance. However it is very unlikely that this will be an issue for you as the maximum payment you can receive as a loan through NLFASS is 90 per cent of your LFASS payment, we will automatically deduct the NLFASS payment from your LFASS payment.

Q. What if a loan turns out to be more than the value of my eventual LFASS 2016 payment?

A. We have designed this scheme so that your LFASS payment should be more than or equal to the NLFASS paid to you. We will deduct the NLFASS payment and pay the remainder of your LFASS payment to your bank account. The deduction will constitute a repayment of the NLFASS.

However, if your LFASS 2016 total is less than the NLFASS you have been paid then you will have to repay the difference between the two amounts. Should this be the case, we will write to you explaining the situation. If you repay the balance within seven days, no interest will be charged. After seven days, interest at 3.98 per cent per annum on the difference will be charged

Q. When will LFASS 2016 payments be made?

A. We are working hard to progress these payments including through necessary IT enhancements that reflect the complexity of the LFASS scheme.

Q. I have been inspected – am I included in this?

Yes, so long as you are eligible for an LFASS 2016 payment.

i) The Sum is a loan and will attract interest at the rate of 2.98 per cent. Repayment of the Sum is due on the earlier of (a) the seventh day following the date you are notified that your final LFASS 2016 payment has been made or, as the case may be, you are notified that no LFASS 2016 payment is due; or (b) 31 December 2017. This interest will be borne by the Scottish Ministers (hereafter the “Scottish Government”) on your behalf and constitutes a State aid as described in paragraph (vii) below.

ii) Interest on the Sum under paragraph (i) will be paid on your behalf by the Scottish Government if repayment is made in full on or before the due date set out above. If you retain the Sum, or any part of it, otherwise than in accordance with these terms you will be liable to pay the interest on the Sum in full.

iii) In the event that the Sum, or any part of it, is not repaid on the due date mentioned above you will also be liable to pay interest on the Sum or any balance outstanding at the rate of 3.98 per cent per annum until repayment is actually made.

iv) We may at any time, and without further notice to you, set off any liability that you have to repay the Sum (together with any interest that may be due) against any liability that we may have to make any other payment to you however arising. Any exercise by us of the right under this clause shall be without prejudice to any other rights or remedies that we may have against you whether under this agreement or otherwise. For the avoidance of doubt, this right of set off may also be exercised by us against any liability that we may have to make a CAP payment to you.

v) In the event that the full amount of the Sum is set off against a CAP payment due in relation to your current application no interest will be charged. If part of the Sum only is set off, interest on any outstanding balance will be due to be paid by you from the repayment date at the interest rate stated above.

vi) No waiver by us of any of the terms set out in this letter or any of our rights or remedies will be effective unless given in writing and signed by us or on our behalf. No failure, forebearance or delay by us in enforcing any right that we may have against you will constitute a waiver of that or any other right or remedy nor will it preclude or restrict the further exercise of that right by us. No single or partial exercise of any right or remedy under this agreement or otherwise arising shall prevent any further exercise of the same right or remedy or of any other right or remedy however arising.

vii) Interest paid on your behalf by the Scottish Government represents State aid to your farm business (under Regulation ‘EU’ 1408/2013). For every 12 months you hold on to the funds it will accrue £29.80 of State aid benefit for every £1000 of NLFASSS16 payment. It is your responsibility to keep a record of all aid to your farm business under all schemes and to make sure that the combined total aid is less than the de minimis level of €15,000 (euros) in any fiscal year and the previous two fiscal years combined. In accepting the Sum you are declaring this limit will not be breached.

viii) Your obligation to repay any monies due under this letter and its terms rank equally with or senior to all other debts or liabilities you may have.

ix) The Scottish Government will be entitled to require immediate repayment of any monies due under this letter and its terms if you have provided false or inaccurate information in relation to your LFASS 2016 application or the NLFASSS2016.

x) The Scottish Government will be entitled to require immediate repayment of any monies due under this letter and its terms if you or your agricultural business becomes insolvent, or otherwise unable to pay its debts, is made bankrupt or otherwise dissolved.

xi) The Scottish Government will be entitled to require immediate repayment of the Sum if it considers it is required to recover such sum in order to ensure compliance with its obligations under EU law, together with interest at such rate and on such basis as may be determined from time to time by the European Commission.

De minimis payment schemes include:

• Crofting Cattle Improvement Scheme (Bull Hire Scheme)
• Sea Eagle Scheme
• Rural Priorities Outcome Plan
• AECS Farm Environmental Assessment Payment
• New Entrants and Others 2013
• Weather Aid Scheme 2013
• BVD Check Payments
• Fallen Stock Fund
• Fox Control Scheme
• Biofuels Programme
• Resource Efficient Scotland
• Clyde and Avon Valley Tree Planting Scheme
• Dairy Farmer Island Concession Scheme
• Weather Impact Support Scheme for Westray Farmers
• Cash Flow Loan Scheme
• 2015 National LFASS Scheme
• 2015 National BPS Scheme
• 2016 National BPS Scheme