The Budget provides much needed clarity on Inheritance Tax Relief, Agricultural Property Relief and BNG

11th April 2024

The introduction of the Biodiversity Net Gain scheme (BNG) has opened doors for landowners and land managers to be able to sell off-site biodiversity units on their land. The scheme presents a new opportunity for landowners to create a revenue stream however, up until now the inheritance tax position surrounding the scheme has been unclear and specifically, the question of whether the land will still qualify for agricultural property relief has remained unanswered.

As part of the Spring 2024 bu,dget the government has announced an extension to the existing scope of Agricultural Property Relief (APR). From 6 April 2025, the scope of APR will now include all environmental land management schemes which encompasses land managed under environmental agreements with responsible bodies. We await legislation in respect of the widened scope to provide certainty, but the intention is that the extension will now cover BNG.

Some of the main features of the relief extension include:-

  • The extension will cover lifetime transfers and transfers of land at death on or after 6 April 2025.
  • APR will be available where there is an agreement in place for BNG on or after 6 March 2024 or if the agreement was entered into prior to that date, it will be available if the agreement continues after 6 March 2024.
  • APR will continue to be available where a BNG agreement has concluded if the land continues to be managed in a way that is consistent with the BNG agreement.

Important details

APR will only apply to the agricultural value of land which qualifies for relief, generally by being owned for a period of 2 years and used for the purposes of agricultural production.  However, the existing holding period for agricultural property relief will not be restarted by land use change. This means, for example, if an owner-occupier had occupied agricultural land and used it for agricultural purposes for 2 years or more then converting a parcel of the same land to environmental use will not require the land to be held for a further 2 years to qualify for relief.

A boost for landowners

This clarity should provide comfort for anyone considering using their land for BNG purposes. Our specialist team will not only provide taxation advice in respect of the BNG scheme but also real estate, commercial, planning and environmental advice.

To find out how we can help you, contact Adam Hastie or John Feaster

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