Published: 27/05/2025 By Jack Edwards
Within the 2024 Autumn Budget, it was confirmed that from 6th April 2025, Agricultural Property Relief (APR) would be extended to include farmland which had been taken out of agricultural use under an environmental agreement with a public authority, including the UK government, public bodies, local authorities or approved responsible bodies. It will affect farmers and agricultural landowners who change long-term land use, moving from agricultural to environmental uses.The policy paper aims to support farmers and land managers who want to deliver climate and environmental outcomes alongside food production while maintaining APR.
Section 61 of the Finance Act 2025 now replaces S.124C of the Inheritance Tax Act 1984 with new provisions confirming that land used within environmental management agreements will be treated as agricultural property occupied for the purposes of agriculture if it was agricultural land in the two years before it became subject to an environmental management agreement. Since then, it has been used and managed in accordance with the agreement.
In addition to land, potential relief is available for buildings and character-appropriate dwellings used in relation to the environmental management agreement.
The definition of agricultural value for agricultural land, buildings and dwellings falling within this use is considered the property's value if it were subject to a perpetual covenant prohibiting its use otherwise than under the environmental management agreement (whether or not the agreement is still in place). In understanding the impact this will have on value, it will be necessary to consider the specific terms of an agreement, and recognising the importance of these as part of any initial discussions will be of enormous importance.
While the policy objective is to give confidence and support to farmers and land managers, there is still uncertainty, but as cases are considered in practice, we may start to see more clarity on the matter.
Symonds & Sampson can provide advice on aspects of Inheritance Tax and APR in conjunction with specialist tax and legal advisors. Please contact Jack Edwards, Partner in the Salisbury Office, on 01722 334323 or our experts in your nearest office.
