New EU rules will create an active market for the rights to farmland subsidies, says RICS (Royal Institution of Chartered Surveyors).

The Single Payment Entitlement is a right to subsidy which replaces previous systems of EU financial support on arable land and livestock. It is granted to the farmer of the land, whether a landowner, tenant farmer or partnership working through a shared farming agreement.

For the first time, these Entitlements have been 'decoupled' from the land itself and can be traded as separate assets when they are issued next month by the Department for Environment, Food and Rural Affairs (Defra).

RICS spokesman Hugh Fell, said:

"For the purposes of valuation we will have a brand new asset that will be valued for security, taxation and net worth purposes. The market will be attractive to some but also risky, as high level political focus on the future of European farm subsidies continues.

"The basic underlying value of farmland may also fall where the new entitlements are detached."

The market will be limited to those registered as farmers. Numbers have swelled in recent years to include amenity and hobby farmers, as well as those looking for favourable inheritance tax arrangements.

Agricultural land and associated residential property may have relief from inheritance tax, though the tax authorities have recently recovered some relief on the residential side.

By the closing date of 15 May 2005, 122 000 businesses in England had applied for Entitlements. RICS estimates that the value of UK Entitlements is close to £800m.

Tim Adams of Chartered Accountants Saffery Champness, said:

"The new Single Farm Payment regime throws up a host of opportunities but also a number of potential pitfalls concerning valuation and taxation that have the potential to impact significantly on how rural businesses are run.

"It's important that land managers are aware of these and seek appropriate advice, because failure to do so could lead to unexpected tax bills and real financial hardship".

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