Biodiversity: gains to be made but uncertainty remains

02 December 2022 - Chris George

It was back in 2019 that the then Chancellor Philip Hammond announced that any new development would have provide a 10% uplift in the biodiversity of the site in order to achieve planning permission.

A lot can change in three years, for example we have gone through four Chancellors in that time, however BNG remains. This concept is being brought into planning law and will become mandatory by 2023, although it has already been voluntarily adopted by many local authorities.

The new policy will require any new development to demonstrate a net gain of a minimum of 10% of the biodiversity value of the site, measured using Defra’s Biodiversity Metric. This will apply to development that requires permission under the Town and Country Planning Act as well as to Nationally Significant Infrastructure Projects.

To achieve this gain, developers have two options available to them: they can either create a new habitat or enhance the existing habitats on site. Both options will involve a mix of wetlands, planting and managing woodland, and creating and maintaining wildflower meadows. Regardless of the option chosen, the habitat must be locked in for a minimum period of 30 years.

In order to ensure no habit is recoded twice, all agreements need to be registered with Natural England. All avenues should be explored to retain the biodiversity uplift on the site where the development takes place, but if this is not possible, other land may be used providing it falls within the same local authority. This planning policy clearly creates an opportunity for farmers and landowners. There could be an increasing demand to sell or lease areas of land to developers, who can then use them to create the biodiversity units required under their planning permission. This will be a particularly attractive option if there are areas of land which are unproductive, unprofitable or difficult to access.

Turning these ‘problem fields’ into wildflower meadows, woodlands or wetlands could provide a guaranteed income stream for a 30-year period whilst also saving time and costs, when compared to using these areas for agriculture where this is no longer profitable in a post-subsidy environment. In addition, if woodland is created on the land which is leased to a developer, the landowner may also be eligible to create and sell Woodland Carbon Units, adding a further revenue stream.

Given the ambitious housebuilding targets set by the current government, these planning changes could result in a huge demand for land outside of residential developments to be utilised for creating biodiversity net gains. While demand and price for such land will vary in each region, in some areas very significant new revenue streams could be created. However… while the opportunity to create a new, stable, income stream using unprofitable land is undoubtedly appealing, care should be taken as there are still a large number of uncertainties regarding the application of biodiversity units.

Firstly, any land offered up for biodiversity projects must be taken out of normal active production for a period of at least 30 years. Even after this initial period has passed, it may be problematic to return the land back to productive use. The land may have become an ecological area of great significance for example, which would prevent any change of use. Secondly, there are still a large number of of unknowns regarding the tax status of biodiversity units. Will land given over to biodiversity initiatives still qualify for valuable Inheritance Tax Reliefs such as Agricultural Property Relief and Business Property Relief? Will Capital Gains Tax Reliefs such as Holdover, Rollover and Business Asset Disposal Relief still apply if the land is gifted or sold?

The legislation just simply hasn’t caught up with the new opportunities. While nothing is certain, it is thought that providing some kind of trading activity is still undertaken on the land, then many tax reliefs may still be applicable. However, the level of the trading activities that need to be maintained is still unclear. There may also be issues to consider with many landowners who have entered into agreements for renewables on some areas of their land in recent years.

The importance of understanding new and emerging opportunities cannot be downplayed, especially at a time when there is increasing pressure on agricultural income. However, any decision which is likely to have a multigenerational effect on a landholding should not be taken lightly and without obtaining detailed, professional advice.

At Scrutton Bland we have a number of clients who are leading the industry in this area and looking to create some exciting biodiversity projects using their landholdings. As such we have both knowledge and experience in providing detailed tax and business advice for businesses looking at opportunities in biodiversity net gains. Get in touch to see how they can help you.

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