Farmers who convert farmland into woodlands, wetlands or scrub face having to pay inheritance tax. The Government wants to get 75% of farmers in England “engaged in low-carbon practices by 2030”, but has overlooked the fact that the children of any farmers doing the Government’s bidding would have to pay 40% inheritance tax on the value of the land. The Telegraph has more.
Landowners in England are currently exempt from paying inheritance tax on land that is used to grow crops or rear animals, under policies designed to ensure farms can be passed down through generations.
But land that is turned into woodlands, wetlands or scrub, in line with the Government’s goals to restore nature and help tackle climate change, would currently be subject to inheritance taxes of 40%.
Archie Ruggles-Brise, who manages his father’s 2,000-acre Spains Hall Estate in North Essex, said the tax risk was holding back green ambition.
Mr. Ruggles-Brise is part of a pilot scheme run by Natural England to create better habitats for wildlife and plant life to be sold as credits to developers to offset the impact of new homes.
The scheme is one of several being rolled out as part of the Government’s overhaul of its £2.4 billion agricultural subsidy regime to help meet its goals to reverse nature loss by 2030 and cut carbon emissions.
But Mr. Ruggles-Brise said the threat of inheritance taxes has forced him to compromise on what he does on the land, which is currently mostly used to farm crops.
“We have had to make allowance as part of that process for the massive amount of uncertainty around taxation,” added Mr. Ruggles-Brise.
He said the ultimate tax bill could end up costing tens of thousands of pounds and force him to sell off part of the family estate, which he hoped to pass down to his own children.
“You have to sell things to meet the tax burden, which means that you then get fragmentation of farms and estates,” he said.
The tax threat is stopping Mr. Ruggles-Brise from converting land to scrub or wetland, which Natural England said has significant ecosystem benefits for carbon sequestration, water quality and birdlife.
It may also be holding back the development of woodland, which is vital to meet the Government’s climate change targets. Only woods planted for commercial forestry, such as conifers, are currently exempted from calculations of the value of the estate, which does not include valuable native broadleaf trees, which suck up more carbon as they mature.
“It’s a massive disincentive for us to push the boundaries to what is environmentally the best thing,” Mr. Ruggles-Brise said.
“To achieve the Government’s 25-year environment plan aims and to deliver on things like its plans for water, we need large-scale land-use change. And this is one of the things that is standing in the way.”
Removing the inheritance tax burden could spare farmers a £120 million annual tax penalty, according to analysis from the Energy and Climate Intelligence Unit (ECIU), a think tank, and Strutt & Parker, a rural property consultancy firm.