Subsidies and grants to support farming and the wider environment are currently undergoing some major changes, the latest update was on 4th April 2023. While farmers and landowners are still being encouraged to produce food and other products in a sustainable way, a greater emphasis is being placed on their role in maintaining and improving the natural environment.
Cases of farms where the way agricultural land has been farmed has changed, to less intensive, or agricultural production has ceased altogether can now be found. As an example, the land may have been planted with trees which can be used to sequestrate carbon and generate carbon credits which can be sold by the farmer/landowner.
Land which is no longer being used for the purposes of agriculture (IHTM24061) is very unlikely to qualify for agricultural relief (IHTM24011), unless, for example, it is woodland that can be shown to be ancillary to other agricultural land (IHTM24032).
However, depending on how it is used as part of a person’s business, it is possible the land may still qualify for business relief (IHTM25131) if the overall business is not one of wholly or mainly making or holding investments, IHTA84/S105(3).
If the former agricultural land is being used under the Woodland Carbon Code (WCC) or Peatland Carbon Code (PCC), note the guidance at IHTM25253.
You will need to look at all the activities of the business as set out at IHTM25265 when deciding whether the business or company shares will qualify for business relief.
As an example, a farm business owns a 300-acre farm used for raising cattle and growing root crops. The business decides to remove 80 acres of the land from agricultural production and enter it into an agri-environment scheme for which they receives grant payments. As the 80 acres is no longer being used for the purposes of agriculture it will not qualify for agricultural relief. However, as the business is still mainly one of farming, along with the receipt of income from the agri-environmental scheme, the land will qualify for business relief as it is used in a business that is not wholly or mainly one of making or holding investments.
Note that if the farmer was a non-farming landowner and leased the farm to a tenant, business relief would not be due as the provisions of IHTA84/S105(3) would apply (IHTM25261). Agricultural relief would be restricted to the land still being used for the purposes of agriculture.