Alongside the Budget documents a new consultation entitled ‘Taxation of environmental land management and ecosystem service markets’ was published.
This consultation and call for evidence considers a number of wider environmental issues. ‘Part 2’ of this document is a consultation about the scope of two aspects of Agricultural Property Relief (APR) for Inheritance Tax (IHT) purposes. Firstly, expanding APR to allow for non-agricultural land stewardship schemes. Secondly, tightening APR for landlords so that they only get 100 percent relief where the tenant has an interest of at least eight years. It has been clear that APR needed some reform if tax policy is to support the Government’s intended moves from subsidy based land ownership to a system which rewards countryside stewardship and sustainable farming initiatives.
This is because when land moves permanently out of agricultural use it ceases to qualify for APR. The loss of APR may far outweigh any government payments and effectively prevent the farmer/landlord from participating in non-agricultural schemes. In the past there have been rules to bring specific stewardship schemes into APR and the sector has been hoping, if not assuming, that the same would happen again.