We have recently received a reminder from the British Society of Plant Breeders (BSPB) that in many cases, where farmers are saving homegrown seed for planting in future, there is a legal responsibility to “self assess” the process and pay an appropriate royalty.
Further details are set out at beyond, where the whole text of the BSPB letter is included.
This situation has been known for many years, and has always been a point at issue in an audit situation where compliance with relevant legal obligations is an audit issue. However, it seems that there may also now be a money laundering angle to the matter. Put simply, there is a legal requirement to pay the royalty so if an accountant acting for the farmer knows or suspects that the farmer is engaged in money laundering, by evading the Farm Saved Seed payment (if we conclude this is a criminal offence), then the accountant may have an obligation to make a Suspicious Activity Report to the National Crime Agency.
BSPB ISSUES REMINDER ON FARM-SAVED SEED LIABILITIES
As part of the ongoing FAIR PLAY campaign on farm-saved seed (FSS), the British Society of Plant Breeders is reminding farmers and their professional advisers of the need to recognise FSS payments as a potential source of financial and legal liability when filing the farm accounts. BSPB chief executive Dr Penny Maplestone explains.
Through the FAIR PLAY campaign, BSPB and the major UK farming unions (NFU, NFUS and UFU) have joined forces to support continued innovation in plant breeding by optimising the collection of farm-saved seed payments from individual farmers.
The central objective of FAIR PLAY is to create a level playing field in which all farmers contribute fairly for the benefits of using farm-saved seed, so safeguarding future investment in the development of improved crop varieties, adapted to the needs of UK producers and their customers.
The campaign was first established in 2005 in direct response to concerns that evasion of FSS payments, estimated at up to 40% across the combinable crop sector, was draining vital income away from UK-based breeding programmes.
Through improved communication, more targeted enforcement and simplified FSS declaration and payment arrangements, the FAIR PLAY campaign has already come a long way in tackling that gap.
Since the campaign was launched, FSS income collected by BSPB from farmers and seed processors has more than doubled, from £4.5m in 2005 to £10.4m last year, and now accounts for around a third of the total income available to support UK plant breeding programmes.
Protecting that investment is now more important than ever.
Britain’s farmers face great uncertainty in the context of Brexit and its potential impact on trade, competition and support payments, but one thing is clear – continued investment in plant breeding research and innovation will be essential to maintain the sector’s competitiveness as well as its resilience to future challenges such as climate change.
And with so many plant breeders now headquartered or owned outside Britain, ensuring our seed royalty and FSS payment systems are as efficient as possible will also be key to maintaining and attracting investment in UK-based breeding programmes after Brexit.
Communication has been at the heart of the FAIR PLAY campaign’s success, focused on raising awareness of the benefits of continued investment in plant breeding, while also ensuring farmers and their advisers are clear about their legal responsibilities on FSS use, declaration and payment.
At the same time, investment in staff resources, a new farmer database and improved intelligence about seed and variety use have significantly strengthened the FSS collection system and its ability to identify and tackle non-compliance.
Farmers who do not comply with the requirement in law to declare and pay for the use of farm-saved seed are not only undermining future research and innovation, they also face the prospect of legal action and substantial penalties.
Accountants, farm secretaries and other professionals supplying book-keeping and accounting services to farmers therefore need to be aware of the farm-saved seed rules to ensure that any professional advice they provide is based on a proper understanding of the legal position and that any financial and legal liabilities are appropriately recognised.
In this respect, UK accounting rules would require farmers to recognise the liability on the use of farm-saved seed within their financial statements.
Accountants and auditors alike should ensure that farming clients have accurately recorded these liabilities, and would be well-advised to seek a written representation specifically on this point.
This is particularly true in the case of significant-sized arable farming businesses, where nearly all farmers will have saved at least some of their own seed. As a general guide, a FSS payment is very likely to be due for autumn plantings for calendar year accounts, and on spring sowings for March/April accounts.
For example, a 5,000 acre arable farmer using farm-saved seed on most of his area could need to recognise a calendar year-end liability of £8,000 in FSS payment on autumn sowings if this has not already been paid.
More detailed information about farmers’ legal obligations on farm-saved seed is available on the FAIR PLAY campaign website, but the main issues in law are:
Details of eligible varieties and FSS payment rates are published annually by BSPB. Declaration forms are sent out each year in November for autumn plantings and in May for spring plantings.
For further information or advice on FSS payments, please call the FSS Helpline on 01353 653209 or e-mail email@example.com.
Farming & Rural Business Community, December 2018