In 2023, the government held a consultation and call for evidence on the taxation of environmental land management and ecosystem service markets. The consultation outcome, published alongside the Spring Budget 2024, highlights some key actions. 

From 6 April 2025, the scope of agricultural property relief (APR) will extend to land managed under an environmental agreement with, or on behalf of, the UK government, Devolved Administrations, public bodies, local authorities, or approved responsible bodies. However, the government will not restrict APR to tenancies of at least eight years.  

The government will also establish a joint HM Treasury and HMRC working group with industry representatives. The working group will identify solutions that clarify the tax treatment of the production and sale of ecosystem service credits and associated units. 

Following the issue of draft legislation on 18 July 2023 to restrict the geographical scope of APR and woodlands relief from 6 April 2024, updated legislation has been published to reflect a change in relation to lifetime transfers made before 6 April 2024. 

Further reading 

• ICAEW REP 55/23 Taxation of environmental land management and ecosystem services markets (icaew.com)
• Taxation of environmental land management and ecosystem service markets - GOV.UK (www.gov.uk) 
• Changes to the geographical scope of agricultural property relief and woodlands relief for Inheritance Tax - GOV.UK (www.gov.uk)