Farmers and Landowners: Tax Consequences

Lord Carrington Excerpts

Monday 28th November 2022 Lords Chamber

Asked by

[Lord Carrington]

To ask His Majesty’s Government what plans they have, if any, to ensure that farmers and landowners do not suffer any disadvantageous tax consequences if they change the use of their land away from agriculture to enter long-term arrangements that (1) deliver improvements in biodiversity, or (2) sequester carbon, under current government schemes.

[Lord Carrington (CB)]

In begging leave to ask the Question standing in my name on the Order Paper, I declare my interest as a farmer and landowner. I also take this opportunity to humbly apologise to the House for failing to declare these interests during a supplementary question I was scrambling to ask during last week’s Question on the private rented sector.

[The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)]

My Lords, farming is going through the biggest change in a generation. The Government are introducing policies in England that work for farm businesses, food production and the environment. Some stakeholders have raised concerns that tax rules, particularly inheritance tax rules, might be a barrier to land use change in certain situations. The Treasury, HMRC and Defra have been working closely to consider the potential need for changes to the tax system, including where rules may need to be clarified.

[Lord Carrington (CB)]

I thank the Minister for her kind words; however, we need a little more action. It would seem to be a platitude to say that the tax system should align with the Government’s climate change and environmental objectives but, over a year since the passing of the Environment Act, there is still no legislation looking at how the tax system effects the sequestration of carbon and biodiversity net gain. Can the Minister confirm that these activities will have the same tax status as traditional farming activities, and be considered as trading income rather than investment income? Secondly, can she confirm that these activities will attract the same inheritance tax reliefs currently available? Without such reliefs, higher agricultural land values as a result of carbon sequestration and biodiversity net gain will disincentivise the farmer from joining these schemes.