August 09, 2023


Some of you will remember Baroness Kate Rock’s report that was issued late last year. The report considered how changes could be introduced to balance the interests of both the landlord and the tenant to support a positive relationship that enables the tenanted business to be a success.

Defra have now responded, reporting that they have been working with the Tenancy Reform Industry Group to evolve their plans in line with some of the recommendations made in Rock’s report. Defra have also created the new Farm Tenancy Forum to continue to strengthen relationships between landlords and tenants.

Potential tax implications

At the beginning of June we submitted evidence to the consultation launched in the Budget 2023 exploring the extension of inheritance tax (IHT) relief to include environmental land management schemes and ecosystems service markets. The consultation also considers limiting IHT relief to only cover land that is let out for 8 years or more. We will let you know when their response is published.

Currently, agricultural property relief applies to land used for the purposes of agriculture, but business property relief may still apply if the business is mainly trading. It should be remembered that landlords do not qualify for business property relief on such land.

HMRC recognises that we are experiencing changes to the ways in which land is farmed, including land being farmed less intensively.

HMRC have provided some guidance on the tax implications of land entered into the Woodland and Peatland Carbon Codes but this currently does not go far enough.

Scheme offering and accessibility

Pledging their support for the private market, Defra confirmed the possibility of stacking private sector arrangements and Sustainable Farming Incentive (SFI) agreements. Also, despite the SFI agreements being 3 years in duration, Defra have announced that tenant farmers with less than 3 years on their tenancies can now join without landlord consent and, more importantly, leave without penalty. ELMS agreements can also be entered and transferred, if necessary, at the end of a tenancy.

Landscape Recovery Schemes are also open to tenant farmers if they have management control or landlord consent during the development and implementation stages. Alternatively, the landlord can apply with the tenant’s consent and support.

Finally, the larger value grants under the Farming Investment Fund, Countryside Stewardship capital grants and grants from the Farming Equipment and Technology Funds are all available to landlords and tenants.

To be continued

There will continue to be a review of landlords taking land back for the purpose of entering environment land management schemes in order to consider whether the recommendation of a buffer period is required. Defra also recognises that diversification supports many farming businesses and will review how this can be encouraged within FBTs rather than restricting it.

The report, and Defra’s response, have been welcomed across the industry, but we await the outcome of the consultation regarding the IHT position of environmental land management schemes.


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