Farmers and landowners are being warned there is a real risk that rewilding could threaten the availability of agricultural property relief (APR).
To qualify for APR, land needs to be used for the purposes of ‘agricultural production’, along with other requirements.
But if production is taken out for environmental schemes, chartered accountant Saffery Champness warns this could mean that the farmer will lose the availability of APR.
In the past, many schemes have been established to support and incentivise farmers who make their land better for biodiversity or for specific habitat creation.
Capital tax policy in the past has seen certain schemes either named in the legislation or relief, and has continued to be available as the land set aside makes up a small percentage of the total land being farmed. As such, no restriction on relief has been required.
But going forward, landscape scale schemes are needed and are being encouraged to make significant inroads into flood management, soil regeneration, habitat recreation and biodiversity protection.
Some of the schemes will allow an element of agricultural occupation to continue, Saffery Champness explains, such as where grazing is required as part of an accelerated rewilding project.
But the firm warns that many projects, however, are likely to fail to meet the current definition of agriculture and therefore continued access to capital taxes relief will fail also.
There will be farms where environmental land management is the major land use, rather than this being ancillary to agricultural production.
Peter Harker, partner at Saffery Champness, says this issue is of concern for those farmers who wish to enter new environmental schemes, but also do not want to lose the availability of APR.
Saffery Champness and other professional advisers such as the CLA are actively lobbying government to review and address this issue.
"For some this is providing a block to committing to some of the new schemes available under ELMs," Mr Harker explains
"This could prove to be a major disincentive with regard to uptake of new schemes and ultimately to the achievement of ambitious climate emergency targets.
“From an inheritance tax perspective it may still be possible to gain relief on the land value in question where Business Property Relief is available on the wider landholding.
"However, for those with tenanted farmland and those wishing to access holdover relief by virtue of the land qualifying for APR there are still genuine concerns that will remain until we receive clarification from government.”
