The Environmental Land Management Schemes & Tax - Protect Your Client’s Position

Introduction

The focus of this learn live session is the tax compliance and planning on environmental projects. It is very good news that, following the Spring Budget 2023 and 2024, the agricultural property relief (APR) definition has been extended to include land being controlled under Environmental Land Management Schemes (ELMS) from 2025. This session will include the drop in APR to 50% and BPR to 50% from April 2026 (or 2027) with £1million allowance.

This presentation is mindful that all other tax on the environment, income streams etc, is subject to a working group post the consultation. There is a practical worry as to what happens to APR and business property relief (BPR) in the meantime or the “gap” until the tax guidance is announced post the working group findings. For farmland currently being administered on the death of a farmer that is in an environmental scheme there are suggested BPR solutions whilst we await the results. The potential tax treatment of all environment schemes in the round is considered.

Such concerns would especially apply to rewilding and other ‘eco-warrior’ projects not falling into ELMS and the income-generating established grant schemes such as land recovery and wetlands projects together with tree planting producing “carbon credits”. Likewise, there is the question of matching expenses with income and whether the credits can be subject to capital gains tax (CGT) with the possible devaluation of the land. We also consider the increases to CGT rates from the Autumn Budget 2024.

This session will consider how to protect your client’s position whilst the results of the proposal are awaited with regard to APR/BPR claims and indeed all tax compliance and planning around environmental schemes. BPR will be a big focus as will ensuring that s.105(3) and the Balfour Matrix are achieved, especially following the Kingsworthy Meadow Fisheries, Butler and Tanner cases.

We will look at the impact of the cancellation and reinstatement of SFI, and of the gradual loss of the Basic Payment Scheme (BPS) together with the negligible value claims for CGT on purchased BPS entitlements.

What You Will Learn

This virtual classroom session will cover the following:

• ELMs post Budget 30 October 2024 - the tax treatment
• Planning around CGT on carbon credits due to devaluation of land in the context of the small CGT increases
• Potential routes for relief for someone who had died owning such land in the ‘gap’ before the results of the working party:
• Claims for APR based on evidence, case law and the pressure being placed on farmers by environmentalists in anticipation of the results of the consultation. ELMS applies from April 2025
• Business property relief (BPR) if appropriate as part of the whole business in the context on the negative s.105(3) cases of the wedding barn, the fishery and the furnished holiday accommodation
• Importance of evidence to support APR/BPR claims
• Environmental grants and BPR claims on commerciality of carbon credits
• Negligible value claims on purchased BPS
• Land valuation under carbon contracts and ELMS valuations generally
• The payment of carbon credits up front - the matching of future maintenance costs and reduction in tax liabilities
• The importance of Accounts disclosure - need to disclose accounting policies of all ELMs schemes and interaction
• The need for tax planning before farmers sign the ELMS contracts - tax planning from the “get go”
• The need to update all legal documents - Wills, Partnership Agreements, CFAs etc. in the light of ELMs and Autumn Budget 2024 changes to IHT reliefs
• The impact of the Rock Review on tenancies - rejection of 8-year FBT in the Budget and general impact on tenancies
• The pressure placed on the need for compliant Contract Farming Agreements (CFAs) following the Rock Review, etc. and the criticism of CFAs
• Environmental projects as part of the whole farm tourist offering - the emergence of Tanner Hotel
• Impact of the abolishment of the FHA tax advantages on farm tourist and environmental offerings
• Tax tribunal on camping pods and capital allowances - Acorn Ventures - use for environmental projects tax planning
• Tax planning around wind farms, slurry control, solar panels on roofs

Recording of live sessions: Soon after the Learn Live session has taken place you will be able to go back and access the recording - should you wish to revisit the material discussed.