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HMRC internal manual

Inheritance Tax Manual

Agricultural purposes: Qualifying uses of land: the habitat scheme

A number of ‘habitat’ schemes have been introduced throughout the UK to help to preserve the nature of the countryside and to maintain a habitat for wild animals and birds. These schemes tend to ban agricultural production for long periods and so land managed under these schemes would not normally qualify for agricultural relief.

FA97/S94 introduced IHTA84/S124C as an addition to the IHTA and you may accept that land subject to an undertaking under these schemes

  • is agricultural land, (IHTM24031)
  • the management of the land in accordance with the terms of the scheme is an agricultural purpose, (IHTM24060) and
  • buildings used in connection with such management are farm buildings (IHTM24035).

The normal periods of time that apply for occupation (IHTM24070) and ownership (IHTM24100) still apply.

IHTA84/S124C applies to all immediately chargeable transfers (IHTM04067) and deaths that occur on or after 26 November 1996 and to all potentially exempt transfers (IHTM04057) that fall chargeable and any additional charges to tax that arise as a result of a death on or after that date.

The schemes concerned are

  • those contained in the Habitat (former Set-Aside Land) Regulations 1994 SI1994/1292, so land previously set-aside (IHTM24064) ceased to be eligible for agricultural relief until 26 November 1996
  • the Habitat (Water Fringe) Regulations SI1994/1291 and the Habitat (Salt-Marsh) Regulations SI1994/1293. The latter provides a subsidy to a person who undertakes not to use an area of land for agricultural production for 20 years, but who manages it with the objective of establishing an area of salt-marsh. As well as providing a niche for certain birds and plants, such areas can provide increasingly valuable coastal defences against flooding by the sea. The Water Fringe Regulations contain a dual scheme, one prohibiting agriculture for 20 years and the other imposes a ‘benign’ farming regime for 10 years. Land which became subject to either scheme ceased to be eligible for agricultural relief until 26 November 1996.
  • the Habitats (Scotland) Regulations SI1994/2710, operative on 22 November 1994 and the Habitat Improvement Regulations (Northern Ireland) SI1995/134, operative on 1 May 1995, also provide for similar dual schemes. Again land which became subject to a 20 year scheme ceased to be eligible for agricultural relief until 26 November 1996.

Four habitat schemes were introduced for Wales in 1994, three of which require a sympathetic farming regime for 10 years, and so do not conflict with the conditions for agricultural relief. The schemes are contained in

  • the Habitat (Water Fringe) (Wales) Regulations SI1994/3100,
  • the Habitat (Coastal Belt) (Wales) Regulations SI1994/3101,
  • and the Habitat (Species-Rich Grassland) (Wales) Regulations SI1994/3102.
  • The fourth scheme, under the Habitat (Broadleaved Woodland) (Wales) Regulations SI1994/3099, bars agricultural production altogether. As, however, it only extends to woodland where its use as such is ancillary to the farming of land for other agricultural purposes such woodland is to be treated as falling within the definition of agricultural property and as occupied for the purposes of agriculture. All four regulations came into force on 9th January 1995.