Extension of Agricultural Property Relief

In the Spring Budget of March, Jeremy Hunt announced an extension to Agricultural Property Relief (APR). This means that land managed under environmental agreements won't lose APR. If you're a landowner considering changing the use of your land to deliver environmental schemes, this is for you.

However, with the recent General Election, it's uncertain whether Labour will maintain this extension. So, keep this in mind as you read on.

Key details about the APR extension – what we know so far

1. Start date: the APR extension will start on 6 April 2025.
2. Existing schemes: if your land is already in an environmental scheme, the relief will apply even if it started before 6 April 2024.
3. Qualification period: when land joins an environmental scheme, the occupation and ownership periods for APR won't restart. This is good news as it won't reset the clock requiring the land to have been occupied for two years by the landowner.
4. Type of land: the land must have been agricultural for at least two years before joining an environmental scheme. For example, converting a golf course directly into an environmental scheme won't qualify for APR.

Interestingly, the land needn't have qualified for APR during that two year period. For example, someone might have poor pasture which hadn’t been grazed for two years, so it wouldn't qualify for APR as it wasn't being occupied for agricultural purposes. However, it would still count as agricultural land. HMRC is expected to provide further guidance on this point.

5. Type of scheme: the environmental scheme must be run by or on behalf of the UK government, Devolved Administrations, public bodies, local authorities, or approved responsible bodies. Private company-funded schemes won't qualify for relief. However, Biodiversity Net Gain schemes are expected to be covered.
6. End date: APR will continue to apply to land once the environmental scheme ends, as long as the land continues to be managed according to the scheme. This means the land won't need to revert to farming once the scheme ends.

Business Property Relief

The government didn't designate land used for environmental schemes as a trading activity for Business Property Relief (BPR). Instead, the general rules for BPR will continue to apply. HMRC confirmed that land used for the Woodland Carbon Code or Peatland Code would generally likely qualify for BPR, due to the amount of activity needed to manage the land according to these Codes.

The future

While the Spring Budget announcement was a significant step, there is still some detail to be provided. A joint working group between HM Treasury, HMRC, and industry representatives is being set up to look at the tax treatment of ecosystem services more broadly, which should provide further clarity in the future. 

Further resources

For more information and examples of how the extension will apply, go to the GOV.UK page on the taxation of environmental management and ecosystem service markets.