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Financial guidelines for supporting the management of Sites of Special Scientific Interest and Natura 2000 sites

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Financial guidelines for supporting the management of Sites of Special Scientific Interest Natura 2000 sites

Annex A: Rules applying to SNH management agreements

A1. Management agreements may be made under relevant provisions in the 1949, 1967 and 1968 Acts and in the 1994 Regulations 20. SNH may make payments by way of a Management Agreement in the following circumstances:

  • under section 16 of the 1949 Act to secure the management of the land as a nature reserve;

  • under section 49A of the 1967 Act to secure the conservation and enhancement or to foster the understanding and enjoyment of the natural heritage of Scotland;

  • under section 15 of the 1968 Act for the purpose of conserving the flora, fauna or geological or geomorphological features of an SSSI;

  • under section 15 of the 1968 Act, as amended by the Environmental Protection Act 1990 21, for land management activities outside the SSSI which may benefit the nature conservation interest of the SSSI; and

  • under regulation 16 of the 1994 Regulations for the management, conservation, restoration or protection of a Natura site, or any part of it or land adjacent to it.

A2. Payments to agricultural producers under management agreements must be consistent with the European Union rules on payments set out in the Community Guidelines for State Aid in the Agricultural Sector. As a matter of policy, similar provisions will normally apply to non-agricultural occupiers unless other specific State Aid requirements apply. These rules require agreements to comply with the European Council's Rural Development Regulation ("RDR") and the European Commission's Implementing Regulation 22. Article 24 of the RDR states that the basis for calculating support for agri-environmental commitments shall be:

  • Income foregone;

  • Additional costs resulting from the commitment given; and

  • The need, where justified, to provide an incentive.

These terms are explained below.

A3. SNH may offer to enter into a management agreement in accordance with standard rates of payment established in a management scheme. Alternatively, in certain circumstances, SNH may offer an individually-calculated management agreement reflecting the actual costs (or a proportion of the actual costs) and income foregone of carrying out the agreed management, excluding any VAT recoverable by the land manager. Entitlement to compensation on an individually-calculated basis will arise where consent is refused by SNH for "established" management of an SSSI and may also arise where a Land Management Order or Nature Conservation Order is made.

A4. Payments will ordinarily be calculated on an annual basis and will be made either in arrears or at the mid-year point. In exceptional cases where entitlement to compensation arises and there is no loss in annual revenue, payments may reflect the actual loss of capital value. In all cases, best value for taxpayers' money must be achieved.

A5. In accordance with the requirements of the RDR a land manager who enters into a management agreement with SNH will be required to observe at least the Standard of Good Farming Practice (see below) over the entire farm. Where the management agreement includes an undertaking to adjust livestock grazing levels on or around an SSSI or Natura site, appropriate provision may be made to verify that natural or semi-natural grazings elsewhere on the holding are maintained in area and quality within the standards of overgrazing and undergrazing as contained in SEERAD's Standard of Good Farming Practice.

A6. In assessing the level of payments it is a requirement that these do not include the costs of compliance with the Standard of Good Farming Practice, or with legislative or other regulatory obligations. In determining this, regard will be had to the developing range of codes of good practice and those provisions of Good Farming Practice which may be appropriate. These are contained in Chapter 9 of the Rural Development Plan for Scotland. In so far as possible, and in accordance with the principle that payment should not be made for compliance with environmental legislation, this will apply regardless of the actual land use as many aspects of these codes are relevant to uses other than agriculture.

Income foregone

A7. This element of the payment is calculated on the basis of net income foregone by owners/occupiers in modifying or maintaining the land management practice on the SSSI or Natura site to that required to manage it for the benefit of nature conservation. Calculation of income foregone will take into account current land management practices of similar land uses and revenue and cost estimates based on typical farm or other rural businesses within the general area of the SSSI or Natura site. Where the management undertakings involve the loss of, or loss of entitlement to, production based (i.e. non-decoupled) agricultural support payments, this should be reflected in the calculation of net income foregone. However, in light of the reforms of the CAP which will apply in Scotland from 1 st January 2005, the expectation is that, in general, management undertakings entered after that date will not lead to loss of, or entitlement to, agricultural support payments.

Additional costs

A8. Where additional recurring costs of managing an SSSI or Natura site may be incurred, for example, where it is necessary to introduce livestock grazing to a site in order to achieve the appropriate level of management, a contribution towards the annual net costs of this (if any) may form part of the annual management payment. In calculating these additional costs, account will be taken of any incidental benefits to the land manager.

A9. Agreements may also include payments for works and one-off measures to restore or enhance the land's nature conservation value, for example, fencing or scrub control. Where these involve investment in the productive assets of a holding, payments may be limited to a proportion of the cost. If appropriate, payment may also be made for the preparation of a farm plan showing how the management of the SSSI can be integrated with that of the total farm area.

A10. In all such cases, payments will take account of any reasonable incidental costs and benefits to the land manager. In such cases, the length of the management agreement should reflect the reasonable expectation of the life of the investment in terms of its nature conservation benefit or the achievement of that benefit.

Incentive

A11. The RDR permits agri-environment payments to include an incentive, normally limited to a maximum of 20% of the income foregone and additional costs (calculated as set out above) to encourage positive management measures to be adopted. In certain circumstances SNH may consider whether justification exists to permit the inclusion of such an incentive in the payment. This will reflect the special management needs of the specific SSSI or Natura site above normal land management practice in the locality and any significant additional conservation outcomes that the agreement may deliver as well as its contribution to the overall objectives of the Natural Care programme.

Financial impact

A12. Ministers expect owners and occupiers to minimise any potential adverse financial impact arising during their negotiations with SNH. An owner/occupier should not make any contractual or other legal commitment to any operation envisaged in a management agreement before it is concluded, without this having been agreed in writing with SNH. In assessing compensation for modification of established management, account shall be taken of the ability to mitigate any loss elsewhere on a holding.

Terms of the agreement

A13. When making an offer of a management agreement, SNH should ensure the following:

  • There should be a formal agreement setting out clearly the obligations of the parties, the payments that will be made, and the management that will be carried out on the land. An agreement should be in the form of a contract which will bind both parties when completed. SNH, as a conservation body, may register the agreement and create conservation burdens which would be binding not only on the current owner but on future owners of the land. It is important that the agreement complies with the necessary statutory requirements 23;

  • Article 23 of the RDR requires that an agreement will normally be for a minimum term of 5 years, and for no longer than 10 years, except in the case of specific management undertakings where it is shown that the conservation benefits cannot be delivered or secured in a shorter period. There are limited grounds on which agreements for periods of less than 5 years can be entered into. An agreement may include provision for review of the standard payments and other terms, including where appropriate, changes in the circumstances giving rise to the agreement. Prior to its expiry, SNH should consider the need for renewal of an agreement if appropriate to the conservation of the site;

  • Where land is let and a tenant proposes to accept an offer of a management agreement, it may have implications for the tenancy agreement and for the landlord. In all cases, the tenant is required to notify the landlord of the proposed agreement, and SNH will require confirmation that the landlord does not object to the terms of the agreement. As an alternative, a tripartite agreement may be completed between the landlord, the tenant and SNH on the management obligations under the agreement. In addition, where there is a tenancy or licence with less than 5 years remaining, SNH will normally require a tripartite agreement with the landlord that he/she agrees to maintain the land in accordance with the management agreement for the remainder of its term. Similar assurances may be required in relation to mortgagees, or other legal interests in the property;

  • Owners and occupiers are responsible for obtaining all necessary consents and permissions which are required in order to undertake the management in accordance with the terms of the agreement; and

  • Owners of land, which is subject to a management agreement, must notify future tenants, licensees and other third party interests of all the details, and the management requirements contained in the agreement; and they should ensure as far as in their power to do so that the tenant/licensee complies with the terms of the agreement.

A14. SNH will make a contribution to the professional fees reasonably and appropriately incurred in completing a management agreement (VAT on such fees should only be met where the land manager is not registered for VAT purposes) in accordance with its published policy at any time being. Annex B sets out SNH's current policy on reimbursement of fees incurred by owners or occupiers.

Alternative schemes

A15. Payments made by SNH for land management will not duplicate payments for the same undertakings under any other environmental land management schemes. Examples of such schemes include the RSS and Environmentally Sensitive Areas Schemes operated by SEERAD and the SFGS operated by FCS. Land managers must give details of any other schemes of which they are beneficiaries, when entering into discussions with SNH. SNH may require a prior application to an alternative scheme before it offers to enter into a management agreement.

A16. SNH may make payments in respect of land subject to other agreements, where this is for additional management requirements, provided that these complement and do not duplicate payments under existing schemes.

A17. In normal circumstances, SNH would not encourage land managers to seek early termination of agreements in order to allow them to enter into other schemes. It should be noted in particular that early termination of agri-environment agreements could result in a financial penalty being imposed. In exceptional circumstances, however, where all parties (including the body administering the scheme and the one to which transfer is proposed) agree, it may be possible for agreements to be terminated before their expiry, without penalty, in order to facilitate replacement with another scheme which better meets nature conservation objectives.

Transitional arrangements

A18. The introduction of new guidance will result in a period of transition. Where the annual payment in an existing agreement is due to be reviewed, except where the agreement contains specific provisions to the contrary, the basis of that review will be in accordance with the method of assessment set out in paragraphs A4 to A11 above.

A19. There may also be circumstances where it would be beneficial for both parties to an existing agreement to terminate it, and for the owner/occupier either to enter the land into another environmental land management scheme, or take up the offer of a new standard agreement from SNH which is in accordance with this guidance. It must be understood by both parties that this is an entirely voluntary option. However, in negotiating a new contractual arrangement with SNH, the following points may help the parties achieve a satisfactory outcome:

A20. In order to achieve the surrender of the existing agreement SNH may pay a lump sum, but this will be conditional on the future management being guaranteed to achieve the conservation objectives for a minimum of ten years or the remaining term of the existing agreement, whichever is less.

A21. In calculating any lump sum that may be paid by SNH, reference may be made to the Land Compensation (Scotland) Act 1963 24 (as amended). However, the overriding criteria are the need to secure the favourable condition of SSSIs or Natura sites and to deliver best value for money for the taxpayer.

A22. Accordingly, in calculating any lump sum that may be justified, SNH will need to balance the existing nature conservation objectives, the level of payments and the remaining length of term under an existing agreement against the desired nature conservation objectives and the level of payments under a new agreement calculated in accordance with this guidance.

Breach of agreement

A23. In all agreements, SNH shall be able to withhold or reduce annual payments where the agreed management has not been carried out to a satisfactory standard. In some circumstances, SNH may terminate the agreement before it has run its full term. Where any annual or capital payments have been made and the terms of the agreement have been breached, SNH may reclaim part or the whole of any funding, plus an appropriate level of interest. The Scottish Ministers would not, however, expect SNH to take these steps without appropriate efforts, including the use of dispute resolution mechanisms, having been made to resolve the issues.

Capital taxation

A24. Exemption from certain capital taxes may be available to owners of heritage land and property. Inland Revenue Capital Taxes can provide further information about the exemption. Enquires should be directed to the address given in paragraph C5 of Annex C.

A25. If land which benefits, or will benefit, from exemption is already partly or wholly funded by payments made under a management agreement with SNH, the agreement may be amended or terminated to avoid any effective duplicate funding. This is a matter that should be discussed with SNH, not Inland Revenue Capital Taxes.

Land acquisition

A26. It may be appropriate under certain circumstances for SNH to acquire ownership of the property, either voluntarily or by exercising its compulsory purchase powers. Powers to acquire land are to be found in sections 17 and 18 of the 1949 Act, section 24 of the 1967 Act, section 5 of the 1991 Act, under section 39 of the 2004 Act and in the analogous provisions of the 1994 Regulations.

A27. Compensation will be paid in accordance with normal practice, taking account of relevant statutory provision and case law and including appropriate consideration of factors such as severance, injurious affection, disturbance or betterment. Of particular relevance is the Land Compensation (Scotland) Act 1963 25 (and any amendment to this Act or application of it, in particular by the Land Compensation (Scotland) Act 1973 and the Planning & Compensation Act 1991) 26.

A28. In the event of compulsory acquisition, SNH may choose to manage the land directly, or through a leasehold arrangement with a recognised voluntary conservation organisation or other appropriate body. There may also be circumstances where SNH may wish to support the acquisition of land by a voluntary conservation organisation or other appropriate body, and may offer a land purchase grant.