Almost 100 applicants responded to the consultation, including many firms of accountants and professional bodies, and there appears to have been a degree of unanimity in the responses and a broad acceptance of the points made. In essence, it has now been agreed that:

• The government will extend the existing scope of agricultural property relief to environmental land management from 6 April. Relief will be available for land managed under an environmental agreement with, or on behalf of, the UK government, devolved administrations, public bodies, local authorities or approved responsible bodies. Relief will only apply where the land was agricultural land for at least 2 years immediately prior to the land use change. There will not be a need to show the land was used for agricultural purposes and would have qualified for agricultural property relief before land use change.
• The government will also take the opportunity to repeal the existing land habitat provisions in S124C of the Inheritance Tax Act 1984 (on the basis that these are now practically redundant)
• The government will not make any changes to business property relief to deem environmental land management as a qualifying activity. The general rules will continue to apply. The availability of business property relief in any individual case will be decided on the specific facts of that case in the normal way but, as set out in the consultation, owner-occupiers may continue to benefit from business property relief if the land is still used in the business and the overall business is not one of wholly or mainly making or holding investments.
• APR will not be restricted to tenancies of at least 8 years, because it is vital for the future of agriculture that landlords continue to offer land for new tenant farmers. There were felt to be significant risks of this proposal leading to a reduction in the size of the tenanted sector and reducing the number of tenancy opportunities for new entrants.

The government will establish a joint HM Treasury and HMRC working group with industry representatives. The purpose of the working group is to identify solutions that clarify the tax treatment of the production and sale of ecosystem service credits and associated units. Defra will also be a part of this working group. Various other points were picked up in the consultation response, including the key role which accountancy treatment would play in identifying how the income should be recognised and taxed, and the need for detailed HMRC guidance, including worked examples to provide clarity.

The full response can be found here:

• Taxation of environmental land management and ecosystem service markets - Government response to the consultation and call for evidence on selected tax issues