Call for evidence: Taxation of environmental land management and ecosystem service markets

The Treasury is currently consulting on the taxation of environmental land management and ecosystem service markets. Set against the target for the agricultural sector to have 85% of farms engaged in low carbon practices by 2035, ecosystems service markets are becoming an increasing focal point to solve the co-existing issues of facilitating expanding populations and the need to enhance nature.

With mandatory biodiversity net gain on the horizon for new development sites, nature markets have developed as a way for farmers and land managers to attract private investment. For the AD industry, the issue of nutrient management is one which is intrinsically linked to the nature of processing organic waste. And so, ADBA wants to hear from members who are involved in these ecosystem markets, particularly the UK Woodland Carbon Code, the UK Peatland Code, pending insurance units, biodiversity units and nutrient mitigation units.

In particular we are seeking views on the following:

Q1: What has been, or would be, the effect of ecosystem service payments on existing business models, such as farming or commercial timber production?
Q2: What are the main areas of uncertainty in the taxation of trading income for income tax and corporation tax in relation to the production and sale of units generated by ecosystem service markets? Please provide evidence and scenarios, including the relative scale of the concern by explaining where decisions have and have not been influenced by the uncertainty of the tax treatment.
Q3: Should the tax system account for the timing difference between the upfront and ongoing project costs, with the delay in receiving income generating units – for example, should the tax system provide tax certainty in respect of timing mismatches, which may require an override to the accounting treatment?
Q4: How could greater clarity be provided in these areas (e.g. guidance, law changes)?
Q5: Are there any other areas of uncertainty in respect of the broader taxation of the production and sale of units generated by ecosystem service markets? Please provide evidence and scenarios, including the relative scale of the concern by explaining where decisions have and have not been influenced by the uncertainty of the tax treatment.
Q6: How could greater clarity be provided in these areas (e.g. guidance, law changes)?

If you would like to contribute, please contact Jo Goad via email joanna.goad@adbioresources.org by 22nd May.