IHTM25253 - Other relevant business property: Land used under the Woodland and Peatland Carbon Codes

As outlined at IHTM25252, farmers and other landowners are now able to use their land to generate credits to off-set the production of carbon and other gases connected to climate change and there are various schemes to support this change of use.

Two such schemes already in operation are the Woodland Carbon Code (WCC) and the Peatland Carbon Code (PCC). You can find more information about the WCC here and the PCC here.

Land entered into and verified by these schemes to generate credits which can be sold to individuals, businesses or companies to off-set their emissions, or used to off-set the emissions of the landowner’s business, will in principle qualify for business relief (IHTM25131) in their own right. HMRC are of the view that the activities necessary to create, manage and maintain the land for the purposes of generating credits for use or sale will mean any business undertaking these operations will, in general, not be mainly involved in the holding or making of investments, as required by IHTA84/S105(3). Where the business in question is generating credits under these Codes alongside other activities, the generation of credits and the land employed for this purpose will generally be considered a non-investment activity. See the example at IHTM25252.

Ultimately, however, the availability of business relief in any individual case will be decided on the specific facts of that case.

The units generated by the land in question, including ‘pending issuance units’ (PIU’s) – effectively a promise to deliver a carbon credit in future, based on predicted sequestration – will also qualify for business relief providing they are used in, or are an asset of, a qualifying business.

More schemes in this area are being developed and rolled out, such as Bio-Diversity Net Gain, and further guidance will be issued as to the treatment of these for Inheritance Tax purposes when more details are available. If you see a case with land used under these Codes and relief is claimed, seek advice from Technical.