Removing barriers

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Ain this publication, there has been a lot of CLA focus on environmental land management issues in 2021, including on biodiversity net gain and carbon sequestration, to support the government’s net zero ambitions. While these developments will lead to opportunities for landowners, we have been working to ensure that government understands the need to align the tax system with these policies so that tax treatment of land used solely for environmental delivery does not act as abarrier.

The CLA fi rst spoke to HMRC about removing tax barriers to environmental delivery in 2018. With agricultural transition underway and many members considering how they can use their land for environmental management, we have had meetings with HMRC, Defra and the Treasury in 2021 to explain our concerns that the tax position should not deter members from delivering environmental and net zero objectives, including the impact this may have on a tenant’s ability to access environmental schemes.

Con ict with taxes

A key message to government has been that farmers and landowners will not enter environmental or tree planting schemes if it means taking land out of agricultural use, because doing so will mean they no longer qualify for inheritance tax reliefs or capital gains tax (CGT) reliefs. The solutions we have proposed include: extending agricultural property relief to include environmental land management; treating environmental land management as a trade for business property relief and CGT reliefs; and allowing businesses to elect to be a Rural Business Unit.

We also raised our concerns about the interaction between environmental land management and tax rules with the O ce of Tax Simplifi cation (OTS) when we met them as part of their review of CGT. We also reiterated these concerns in our detailed written response. The report the OTS published in May 2021 included recommendations that would be benefi cial to members, but, importantly, the OTS called for the government to do further work to understand how certain tax rules and environmental payment schemes interact. It also referred to calls for the tax system to be modernised to help farmers to address environmental and other diversifi cation issues, and acknowledged that the CLA’s Rural Business Unit proposal could deliver that modernisation.

It is reassuring that the meetings we have held with the Treasury, Defra and HMRC have prompted them to discuss the issues we raised further with each other – as always, tax changes are political decisions. During the lead up to the 2021 Spending Review and Budget in October, we briefed Environment Secretary George Eustice, who was willing to take up the issue with the Treasury. With the current Chancellor of the Exchequer representing a rural constituency, we hope that we will be successful in securing change. The interaction of tax with environmental land management, trees and carbon markets will continue to be an important focus of our work in 2022.

also raised our concerns about teraction between onmental land gement and tax with the O ce x Simplifi cation ) when we met as part of their w of CGT. We