Taxation of environmental land management and ecosystem service markets

As announced at Budget 2023, the government is exploring elements of the tax treatment of ecosystem service markets and environmental land management.

Part 1 of this document is a call for evidence on the tax treatment of the production and sale of ecosystem service units. The aim is to understand the commercial operations and the areas of uncertainty in respect of taxation.

Part 2 of this document is a consultation about the scope of agricultural property relief from inheritance tax. The aim is to explore the extent to which the current scope of agricultural property relief may represent a barrier and, if necessary, potential updates to the scope of the existing land habitat provisions in the relief. The government is also using this opportunity to explore in more detail a recommendation in the recent Rock Review of tenant farming in England to restrict the application of 100 per cent agricultural property relief to longer tenancies of 8 or more years.