As many growers look to enter environmental agreements within the natural capital market , they need concrete guidance on how this land – and the income from the schemes – will be viewed by HMRC.
CLARITY over the tax treatment of land put into environmental schemes must come quickly for farms and estates to enable long-term plans to be put in place, according to property consultancy Carter Jonas Partner Mark Russell.
As many growers are looking to enter environmental agreements within the natural capital market including the Countryside Stewardship Scheme (CSS) and Sustainable Farming Incentive (SFI), they need concrete guidance on how this land – and the income from the schemes – will be viewed by HMRC.
Alongside the spring budget, the Conservative government announced that a working group would be created to clarify the taxation of ecosystem markets and Mark says urgency is required.
“Growers are currently planning for the next five to 10 years and are being encouraged to think about the next one or two generations in these schemes. They need answers as soon as possible.”
The working group is likely to explore how payments by companies to growers to undertake biodiversity enhancement projects will be treated and whether different elements will be taxed as income and capital.
He added: “We had hoped the government would specifically bring biodiversity net gain schemes within the framework of Agricultural Property Relief (APR), but it is not clear whether this is the case or not.”
From 6 April 2025 land managed under an environmental agreement (subject to some conditions) will fall within the scope of APR.
“The government has also confirmed it will not change the qualifying length of tenancy for APR, which we view as positive. Our evidence suggests that setting a longer minimum lease term would have had the unintended impact of reducing the area of land offered into the let land market,” said Mark.
