Consultation closing soon on tax treatment of ecosystem services and APR

31 May 2023

Landscape with river

The consultation (announced in March) is examining the tax treatment of ecosystem service markets and environmental land management, alongside the scope of agricultural property relief (APR) from inheritance tax (IHT). Responses to the consultation closes on 9 June.

Part one of the consultation calls for evidence on the tax treatment of the production and sale of ecosystem service units, with the aim to understand the commercial operations and the areas of uncertainty in respect of taxation.

Part two is a consultation on the scope of APR from IHT, and whether its present form may present a barrier. This part of the consultation is also looking at whether the scope of existing land habitat provisions in the relief should be developed. Additionally, government is further exploring a recommendation made in the recent Rock Review of tenant farming in England. In the review it was proposed to restrict the application of 100% APR to tenancies of eight or more years under the Agricultural Tenancies Act 1995, and secure agreements under the Agricultural Holdings Act 1986, as a means to encouraging tenants to enter long-term environmental agreements.

Martyn Dobinson, Partner, and a member of the Land and Rural Practice Group, says:

“This is an important consultation and a step towards answering many of the areas of concern that may prevent landowners from entering into environmental schemes.

“The second part of the consultation seeks views from across the sector on more general elements of APR and specifically its restriction to longer tenancy agreements. Given the importance of APR in IHT planning for much of the rural sector, it’s important for landowners to review the consultation documentation and contact their professional advisor should any of its contents raise concerns or should they wish to make individual representation on its content.”

The consultation is available to view on the government website.

Contact Us

Martyn Dobinson
Partner, Manchester

Key experience

Martyn works with families and owner-managed businesses in different sectors, with particular focus on landed estates, farming and agribusiness.