A case for a new ‘conservation relief’ alongside APR and BPR

There is concern where the delivery of those public benefits, such as environmental schemes for example, effectively stops land from being used for ‘agricultural purposes.’ Where that land ceases to be used for agriculture, it will likely cease to qualify for Agricultural Property Relief (APR) and Business Property Relief (BPR) for the purposes of inheritance tax. Currently, there is no proposed solution to that issue.

Direct subsidy payments under the current system will be phased out over a transitional period to the end of 2027 and will be replaced by the Environmental Land Management Scheme (ELMS). During that transitional period, Defra has commissioned ELMS pilot schemes. Following the pilot schemes, it is expected that the new ELMS will be implemented during 2024.

Martyn Dobinson, a partner at Saffery Champness and a member of the firm’s Landed Estates & Rural Business Group, says:

“Agriculture is not specifically defined in the inheritance tax legislation and we have to rely on guidance from other areas of law, and on HMRC’s view, when trying to determine whether land or property is used for the purposes of agriculture.

“In broad terms, this also includes horticulture, growing fruit and the intensive rearing of livestock or fish for human consumption. It also includes woodlands that are ancillary to the farming operation, eg woodland shelter belts.

“There are certain exclusions, and there can often be grey areas, especially when it comes to diversification by the owner or tenant. We don’t yet know where ‘farming for biodiversity’ will fit, and whether it will qualify for the current inheritance tax reliefs, but it seems unlikely.

“This vital consideration needs to be addressed, as clearly it will have a significant impact on decisions on whether or not to take up the new ELMS, when thoughts turn to succession planning and gifting of land and property currently used for agricultural purposes.

“There is, potentially, a strong case to be made for a new conservation relief for inheritance tax that fully recognises the commitment of farming businesses to biodiversity, and delivery of the desired public benefits through ELMS. Clarity on the position is certainly needed.”


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