In order for land to qualify for Agricultural Property Relief it needs to be used for the purposes of ‘agricultural production’, along with other requirements. When land is taken out of agricultural production for environmental schemes there is a real risk that in many cases this will mean that the landowner will lose the availability of Agricultural Property Relief.
In the past there have been many schemes established to support farmers in making their land more supportive of biodiversity and other specific habitat creation. Capital tax policy in the past has been for certain specific schemes to be named in the legislation or relief has continued to be available as the land set aside makes up a small minority of the land being farmed and as such, no restriction on relief has been required.
Going forward landscape scale schemes are required to make significant inroads into flood management, soil regeneration, habitat recreation and bio-diversity protection and enhancement. Some of the schemes will allow an element of agricultural occupation to continue especially where grazing is required as part of an accelerated re-wilding project. Many projects, however, will not meet the current definition of agriculture so as to allow continued access to capital taxes relief. Given the scale of many schemes there will be farms where environmental land management is the major land use, rather than being ancillary to agricultural production.
This issue is of real concern for a number of landowners who wish to embrace various environmental schemes, but also do not want to lose the availability of APR. For some this is providing a ‘roadblock’ to them embracing some of the new schemes becoming available under ELMs. We, along with other bodies such as the CLA, are actively lobbying the government to review and address this issue.
It is worth saying that from an inheritance tax perspective it may still be possible to achieve relief on the land value in question if Business Property Relief is available on the wider landholding anyway. However for those with tenanted farmland and those wishing to access holdover by virtue of the land qualifying for APR there are still concerns.
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