Source · Select Committees · Environmental Audit Committee
Recommendation 10
10
Rejected
Ensure fiscal policy provides incentives for natural capital while protecting food security.
Recommendation
The Government should keep under review the effect of its fiscal policy on the availability of land for natural capital investment. In particular, the effect of the inclusion of environmental improvement schemes within the scope of APR relief from April 2025, combined with the changes to APR thresholds to be introduced in April 2026, ought to be monitored for their effects on the supply of land to environmental improvement projects. Care must be taken to ensure that fiscal policy provides appropriate incentives to deliver genuine ecosystem enhancements, rather than providing opportunities to shelter capital from tax obligations, and that it does not encourage the removal of prime land from food production in a way which compromises the UK’s food security. We recommend that the Government report to the House on the operation of APR relief in relation to environmental improvement schemes no later than three months from the end of the 2026–27 financial year. (Recommendation, Paragraph 64)
Government Response Summary
The government agrees to monitor changes to agricultural property relief in the normal way but rejects the recommendation to report to the House by a specific deadline due to data lag and complexity.
Government Response
Rejected
HM Government
Rejected
The government will monitor the changes to agricultural property relief announced in 2024 in the normal way through claims for the relief and stakeholder engagement over an appropriate period. The extension of agricultural property relief from 6 April 2025 to land managed under an environmental agreement with, or on behalf of, the UK government, devolved governments, public bodies, local authorities, or approved responsible bodies means land taken out of agricultural production permanently or for an extended period for this reason does not lose relief. It is intended to prevent the potential loss of agricultural property relief being a barrier to the involvement of agricultural landowners and farmers in land use change under an environmental agreement including, but not limited to, the environmental land management schemes in England and equivalent schemes elsewhere in the UK. Land will only qualify where the relevant body chooses to enter into an agreement to deliver environmental outcomes. The government agrees it is important to evaluate the impact of tax reliefs based on evidence. However, the government does not agree that it should report to the House on the operation of relief in relation to environmental improvement schemes no later than three months from the end of the 2026–27 financial year. Data is only available with a long lag due to the period of time given to estates for valuation of assets and tax payment (if applicable), as well as the time required to clean and process the data. For instance, data for the tax year 2025–26 will only be available once the tax year 2027–28 is complete. Any analysis would require a manual review of all claims for the relief, including the supporting evidence, and it would be challenging to draw conclusions from the claims made by estates in a single year. Reforms to agricultural property relief will therefore be monitored in the normal way through claims for the relief and stakeholder engagement over an appropriate period.