Agricultural Relief and the Spring Budget 2024

The Spring Budget took place on 6 March 2024 (Budget day) and there was some good news for the farming community.

The Government announced that Agricultural Relief (AR) for inheritance tax will be extended to include all environmental land management schemes, covering the Sustainable Farming Incentive, Countryside Stewardship (and other stewardship schemes) and Landscape Recovery, as well as the England Woodland Creation Offer and other similar schemes.  This will apply to transfers on death or lifetime transfers made on or after 6 April 2025.

This will help to provide reassurance to farmers and encourage landowners and tenants to enter into these environmental schemes.  There had previously been some doubt about whether the change of use of the land would mean this valuable relief would be lost.

Relief will be available where there is an environmental land management scheme in place on or after Budget day and will include those arrangements entered into before that date but which remain in place after Budget day.  Where an agreement has ended but the land continues to be managed in a way that is consistent with the original agreement then relief should continue to be available.

AR will only apply to land in a relevant scheme where the land had previously been used as agricultural land for at least two years immediately prior to the change of land use.  This is in line with the normal requirement of land to be used for agricultural purposes for at least two years before it can qualify for AR.  It is not yet clear what evidence HMRC will require as proof of its prior use.  However, the Government has confirmed that the change of use will not restart the clock, so an owner-occupier of land who has owned and occupied the land themselves for the purposes of agriculture for two years who then changes the land use into an environmental scheme will not need to own the land for a further two years but that AR would continue to apply.

There is also comfort that the farmhouse, and other buildings, may continue to qualify for relief (where they reach the qualifying criteria) where the building is occupied with and is ancillary to the environmental land.

Less good news was the confirmation that as from Budget day, AR and Woodlands Relief (WR) is no longer available on land owned outside the UK.  AR and WR had previously been available on farmland in the European Economic Area, the Isle of Man and the Channel Islands.  This had been announced in the 2023 Spring Budget.

If you have any questions about the topics raised in this article, please get in touch.