The Scottish Land Court has underlined the financial risks to farmers arising from inadequate record keeping in otherwise sound applications for coupled support under the Scottish Upland Sheep Support Scheme ("SUSS").
In C Downie & Son v The Scottish Ministers (SLC/8/18) the farming operation applied for coupled support in the amount of £113,000 in respect of 1,800 ewe hoggs. The Scottish Ministers refused to make payment.
The problem was not the eligibility of the ewes but simply that the farming operation could not produce compliant records in relation to them.
The Ministers also imposed a penalty of £113,000 - to be deducted from payments due in the three calendar years following the decision.
The Scottish Land Court upheld the Ministers' decision.
Recognising the potentially disastrous consequences for the farming operation, the Court left open the possibility of a reference to the Court of Justice of the European Union to consider the proportionality of the penalty.
The Court noted that the Scottish Ministers had no discretion to mitigate the penalty because the penalty is imposed by provisions in EU law. The Court described these provisions as containing "a sting in the tail".
The penalty provisions provide that if more than half of the animals claimed for are ineligible, no payment can be made under the scheme for the claim year concerned. The "sting in the tail" is that if more than 50% of the animals claimed for are ineligible the claimant is subject to an additional penalty. The amount of the penalty is the amount of the payment which would have been due if the claim had been accepted. That means that the bigger the claim, the bigger the risk.
In the course of its decision, the Court gave guidance on record keeping. It also confirmed that each of separate locations within a farming operation can constitute a "holding", requiring compliance with transport record keeping rules for movement of animals between different locations within the farming operation.
A hearing was fixed to consider the possibility of a reference to the Court of Justice of the European Union but the parties later agreed the appeal should be dismissed. The result is that no reference to the Court of Justice of the European Union will be made.
The decision stands and the message for farmers is clear. Inadequate records can mean not just the refusal of an otherwise sound application but the imposition of a penalty equal to the value of the claim itself. Since the penalty is to be recovered from valid claims made in the 3 years following the decision, failure to keep adequate records can effectively result in no payment being made for a period of 4 years.