To coincide with the delivery of the Budget on 15 March 2023, HMT has announced a consultation and call for evidence on the taxation of environmental land management and ecosystem service markets. That includes providing BNG, nutrient neutrality and carbon sequestration either as “public goods” or for sale in the private sector. The outcome of this consultation will therefore be highly relevant for those of our clients and others who are looking actively to pursue these emerging revenue streams.
The consultation is in two parts. The first is around the taxation treatment of income derived from these activities and the second is around the scope of agricultural property relief (APR) from inheritance tax (IHT). The aim is for HMT to understand and remove the uncertainties that have been identified as potential barriers to the fullest possible participation by farmers and landowners in agri-environmental schemes and in BNG and other ecosystem markets.
The consultation also encompasses the recommendation in the Rock Review to restrict 100% APR from IHT to farm business tenancies under the Agricultural Tenancies Act 1995 of at least 8 or more years and secure agreements under the Agricultural Holdings Act 1986. This would be a very significant change from the current rules.
The consultation period runs from 15 March to 9 June 2023 and we would encourage everyone for whom these tax issues are relevant to respond.