With the COP26 Summit in Glasgow having drawn to a close, there are calls for the Government to turn rhetoric into action. One easy win would be to update the existing legislation which affords agricultural property tax relief (APR) on environmentally friendly land management, to encourage more farmers and landowners take a long term view in their business and environmental planning.
The requirements for APR:
APR is a relief from inheritance tax (IHT) which reduces the value of any gifts of agricultural property made by a transferor during his lifetime or on his death. There are multiple conditions to be met, but essentially, the land must be situated in the UK, Channel Islands, the Isle of Man, or the EEA, must be occupied or owned by the transferor for the required period, and must be owned and occupied for the purposes of agriculture. There is a large amount of case law surrounding what constitutes occupation for “agricultural purposes” . Land that is likely to be considered occupied for agricultural purposes includes:
- arable land cultivated to produce food for human and animal consumption
- pasture that is used to support livestock for human consumption
- woodland or any building used in connection with the intensive rearing of livestock or fish if the woodland/building is occupied with the land/pasture and the occupation is ancillary to that of the land/pasture.
Rewilding is the practice of allowing areas of land to return to its natural state. It is a form of conservation encouraging restoration of biodiversity to land previously used for agriculture. Previous schemes such as set aside and the Habitat Scheme, which took land out of agricultural production to be managed it for the benefit of wildlife, came within the scope of APR . The Habitat Scheme has subsequently been subsumed by the Countryside Stewardship Scheme and unfortunately the legislation nor HRMC guidance has been updated, so that rewilding and similar schemes no longer qualify expressly for APR, and neither may certain aspects of land managed under Environmental Land Management (ELM), which are intended to support the rural economy while achieving environmental goals. Such schemes offer farmers incentives to manage their land in order to create or improve wildlife habitats. Incentives have historically included subsidies and annual payments. Post-Brexit, farming subsidies in England are dependent on delivering ELM Schemes.
Possible implications for APR
Although such schemes are likely to have an impact on the value of marginal land, there is concern that there may also be knock on adverse tax implications. As Louise Speke, Chief Tax Advisor for the Country Land and Business Association (CLA) explains “With no APR on environmental land, there will be an IHT charge on the value of that land, and there is a risk that APR is no longer available on farmhouse and buildings as not enough land continues to be farmed”. 
One specialist land management and property consultancy service has suggested that ELM Schemes may differ from “rewilding” on the basis that the latter may be considered to be leaving the land to its own devices which arguably removes it from “agricultural” use as we know it (although in some instances may involve as little as less intense grazing and less active management), whereas the ELM schemes are likely to require active management and could be considered ancillary to farming operations, for example where a hedgerow management scheme is in place.
That said, in relation to set-aside (with which rewilding could be compared) HMRC’s Guidance  provides:
“‘Set-aside’ was a scheme designed to reduce the production of arable crops. It was introduced in 1988. Farmers in the scheme agreed to set-aside (that is to stop using for any kind of agricultural production) a percentage (originally at least 20%) of the land they had been using for growing agricultural crops. In return they received annual compensation payments.
While the scheme was in operation we accepted that arable land set-aside to permanent or rotational fallow was both agricultural property (IHTM24030) within the meaning of IHTA84/S115 (2), and occupied for the purposes of agriculture within the meaning of IHTA84/S117 during the period of the set-aside agreement relating to that land. It did not apply to land set-aside for any other purpose.”
Updating the legislation and HMRC manuals to include new environmental schemes would provide clarity and the CLA, which champions landowners and rural businesses, is actively lobbying HMRC, the Treasury and DEFRA to align the tax system with the government’s environmental and climate change objectives. The CLA’s recommendations are to amend the legislation to prevent a tax penalty if landowners adopt rewilding and similar schemes by:
- deeming environmental land to be agriculture so it qualifies for APR;
- deeming environmental land management as a trade for the purposes of Business Property Relief (from IHT) and capital gains tax (CGT) reliefs;
- introducing a more comprehensive IHT and CGT woodland relief for all non-commercial woodland;
- enabling diversified businesses to elect to be treated as a Rural Business Unit. 
One of the major issues faced by the CLA is getting evidence that the tax position is deterring landowners from putting land into environmental schemes. If you would like more information about this or are affected by this issue please get in touch with your usual contact at MTG or email email@example.com.
These notes do not contain or constitute legal advice, and no reliance should be placed on them. If you have any questions, please do not hesitate to speak to your usual contact at Maurice Turnor Gardner LLP.
 Not defined in the Inheritance Tax legislation
 S124C Inheritance Tax Act 1984
 Talking Tax – by Louise Speke – Land and Business June 2021
 IHTM 24064
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