As said previously, using fallen stock is prohibited and could and indeed would lay the farm open to prosecution. There is a very strong probability that such a prosecution would also result in SFP penalties.
The law on fallen stock is covered by this legislation
http://www.legislation.gov.uk/uksi/2011/881/pdfs/uksi_20110881_en.pdf
Occasionally I happen to find one of my ewes dead under a hedge whilst out lamping and am able to shoot a fox scavenging on it but I make a mental note to remove it to a suitable place for collection asap.
However, if I found a "foxer" putting out deadstock as bait and thus leaving me open to all the hassle and the possibility of prosecution I'd not be too impressed.
Simple answer is baiting itself is not illegal and therefore there is no legislation to point you towards. However, the use of fallen stock for bait is not an exempt use (of fallen stock) under the legislation I quoted above, therefore its use is illegal.