Consultation on expanding agricultural property relief
Some IHT reliefs on land to be restricted to UK land
Transactions in cryptoassets to be separately identified on tax returns from 2024/25
The self-assessment returns will be changed to include specific sections to capture details of the disposals of cryptoassets.
From the 2024/25 tax year, new sections will be introduced on self-assessment tax returns to allow for any gains relating to the sale of cryptoassets to be reported separately. These will be added to the capital gains pages of both individual and trust and estate tax returns.
The reporting of gains on cryptoassets is amalgamated with that for other disposals, so they do not currently need to be identified separately as gains on cryptoassets.
Cryptoassets are a relatively new asset class, and their treatment from a tax perspective can be complex. There is some guidance from HMRC but it is relatively high level.
Reporting these transactions separately will give HMRC greater clarity on not just which taxpayers have made disposals, but also the scale and breadth of taxpayers who are holding cryptoassets.
It is likely that the information may result in more focused enquiries from HMRC into the tax treatment of particular disposals, and taxpayers should bear in mind the need to retain detailed documentation to help support their calculations.
The additional information and clarity around the scale of the use of cryptoassets could demonstrate to HMRC the demand for additional guidance or potentially even specific legislation to help clarify some of the complexities around the tax treatment of these particular assets.
When will it apply?
From 6 April 2024
Taxation of environmental land management and ecosystem service markets
The Government has published a call for evidence and consultation to explore both the taxation of ecosystem service markets and the potential expansion of agricultural property relief (APR) for certain types of environmental land management.
The Government is putting in place frameworks to support higher private investment in nature’s recovery with an anticipated nature markets framework set to be published shortly, alongside implementation of mandatory biodiversity net gain for development sites.
The call for evidence focuses on the tax treatment of ecosystem service markets, such as the production and sale of units in connection with carbon, peatland, and biodiversity, as well as the changing landscape in land use and farming. The latter element is also being discussed in the context of the availability of APR where land is no longer being used for agricultural activities and instead being used for environmental sustainability.
Discussions within the call for evidence also highlight the availability of APR for longer-term tenancies of agricultural land following the independent review of tenant farming in England in 2022 by Baroness Rock.
Following the reduction in subsidies from 2027, shifting from the basic payment scheme to the environmental land management scheme, many farmers and landowners are looking to access agri-environmental schemes to supplement income and livelihoods.
With inheritance tax largely at the forefront of many landowners’ minds, and plans of succession to family members in the future, having certainty over income and capital taxes of agri-environmental schemes will provide comfort to many to aid in operational and strategic decisions.
When will it apply?
The consultation closes on 9 June 2023
Geographical scope of agricultural property relief and woodlands relief reduced
Legislation will be introduced to restrict the scope of agricultural property relief (APR) and woodlands relief to property in the UK only.
APR can currently be claimed on agricultural property situated in the United Kingdom, the Channel Islands, Isle of Man or a state within the European Economic Area (EEA) – the latter being broadly any countries in the EU plus Iceland, Liechtenstein and Norway. Woodlands relief can currently be claimed on the value of trees or underwood. though not the underlying land, growing in the UK or a state within the EEA.
Broadly, APR provides relief on the agricultural value of qualifying property for inheritance tax purposes at a rate of 100% or 50% depending on specific ownership and occupation conditions. Woodlands relief provides relief for 100% of the value of trees or underwood but not the underlying land, which is not considered agricultural property.
The new legislation will restrict the ability to claim APR and woodlands relief to land situated in the UK only.
Landowners holding agricultural property or woodlands situated outside the UK will need to consider possible operational changes such as occupying property in hand when it was previously let. For many, the loss of IHT relief might trigger a decision to sell the land outside the UK to acquire land within the UK.
While APR provides relief from the agricultural value only and woodlands relief for the value of trees or underwood, the continued availability of business property relief (BPR) may provide IHT relief where landowners are carrying out a trading business that includes offshore agricultural property and woodlands. Where agricultural land or woodlands are let out to tenant farmers or foresters however, BPR will not usually be available unless the land forms a smaller part of a bigger trading business.
When will it apply?
From 6 April 2024.
Changes to reference date relevant for capital disposals under an unconditional contract
Where a disposal takes place under an unconditional contract and there is a delay in conveying or transferring the asset, the Government will legislate to make changes to the time limits for notification of chargeability to tax and time limits for claiming losses.
The new legislation will affect any person who makes a chargeable gain or an allowable loss on the disposal of an asset under an unconditional contract, where that asset is conveyed or transferred over six months after the end of the tax year for the disposal, or, for companies, one year after the end of the accounting period.
It will alter the time limits for an individual or company to notify HMRC of their chargeability to capital gains tax or corporation tax. It also impacts time limits for any claims in respect of the disposal, such as allowable loss claims, and for HMRC to raise an assessment in relation to the disposal.
These deadlines will operate by reference to the year or accounting period during which the asset is conveyed, rather than the year in which the contract is made.
This is a technical amendment, aimed at closing a perceived tax avoidance route, where individuals or companies enter into unconditional contracts for the disposal of assets.
Where an individual or company makes a disposal, the legislation provides that the effective date of the transaction for CGT or corporation tax purposes is usually the date on which the contract becomes unconditional.
It is possible for the effective date of a transaction and, therefore, various deadlines for reporting, to be manipulated through the use of unconditional contracts that delay a completion date. The amendments aim to prevent this by setting an effective ‘back-stop’ date in these situations.
When will it apply?
Unconditional contracts entered into on or after 1 April 2023 for companies, and 6 April 2023 for individuals, trustees, and personal representatives.
Other capital tax measures
The following is a summary of some of the previously announced measures on capital taxes that have been included in the documentation for this Budget.
- Divorcing couples will be given longer to transfer assets between them without capital gains tax (CGT) consequences. The exemption allowing CGT-free transfers between spouses currently only extends to the end of the tax year in which they separate. Under the new rules, the exemption will be available for up to 3 years after the end of the tax year of separation, or an unlimited time when the assets are transferred as part of a formal divorce agreement. This applies to disposals made on or after 6 April 2023.
- When an individual exchanges shares or securities in a UK close company for shares or securities in a non-UK company, and has a material interest in both companies, the non-UK shares or securities will now be deemed to be located in the UK for CGT and income tax purposes. This is an anti-avoidance measure that applies to exchanges on or after 17 November 2022.
- Payments made under the lump sum exit scheme to retiring farmers will be treated as capital receipts. This is legislation to clarify the position rather than an entirely novel measure.