Whilst we do not know the tax treatment of these payments or how the land use will change the IHT position at this point, one should consider that, in IHT terms, it is the use of the land that is important, so both grassland and woodland can still be agricultural if grazed. With regards to woodland, this may also still be operated as a commercial asset, and so BPR may apply.

The minimum timeframe of 30 years is set within draft legislation, but duration can be longer if agreed – this is a flexible element of the conservation covenant. Some habitat types will come under the protection of other legislation during the initial 30-year period which will prevent them from reverting to a different land use later. For example, if you create a new woodland, once it has been woodland for ten years it has to be restocked if felled. There is similar legislation to protect established wetland.

The tax issue is an important one both in how these payments will be treated – in theory they contain both revenue and capital compensation elements. As for how the land will be treated for IHT purposes – the use may still fit within APR or BPR (as set out above). I was also recently reminded that in the 1990’s a derogation was provided to allow Set Aside land to still be recognised as Agricultural given that the scheme was seen (then) as being a benefit to the public.  It is possible that similar derogations may be provided.

In the example we gave, the assessment of the whole site was that it could provide for its own BNG requirement of circa 40 units and still have a further 260 units left. Given that part of the site would be in BNG use it would be logical (and environmentally sensible) for this part of the site to be made larger and therefore the landowner could have the opportunity to sell those further BNG units to third parties. In practice, they would need to phase that BNG creation to match the developments they sold them to and there would be no point in doing the work unless a linked development site had been "signed up". There is one other alternative that may come about – where a site is linked to the provider of last resort (LPA or Government), it may be that BNG created will then be pooled and the units sold later – this is a possible policy response, but is not covered in the legislation at the moment.

The Environment Bill includes new legislation for the introduction of "conservation covenants," which is the perceived agreement type for securing restrictive or positive management on BNG sites. These are private, voluntary, legally binding agreements, enforceable through the courts, and a Responsible Body with sufficient experience in the management of the habitat will be a party to the agreement and undertake monitoring over the course of the agreement. They will also bind subsequent landowners and the intention is for conservation covenants to be recorded on the Local Land Charges register. However, particularly at the outset, there may be other types of agreement used, such as a lease, or the landowner simply signing up to a section 106 agreement. The actual agreement type will be site specific. For example, a landowner working with a promoter may be asked to add some more land into a planning application to reach the BNG target. That land is likely to be subject to the linked planning condition, it may be purchased by the developer or retained by the Landowner and the supply of the BNG would need to be a condition within the sale to the developer.

The requirement to provide for 30 years is as drafted in the Bill. The Bill states:

A biodiversity gain site is land where:

(a) a person is required under a conservation covenant or planning obligation to carry out works for the purpose of habitat enhancement,

(b) that or another person is required to maintain the enhancement for at least 30 years after the completion of those works, and

(c) for the purposes of Schedule 7A to the Town and Country Planning Act 1990 the enhancement is made available to be allocated (conditionally or unconditionally, and whether for consideration or otherwise) in accordance with the terms of the covenant or obligation to one or more developments for which planning permission is granted.

Whilst they do not constitute development themselves, these BNG sites will be required to enable development to happen once the Bill is passed. Therefore, it is quite possible that Local Planning Authorities may identify sites and keep some form of record of these to help prevent delays in the planning process and to demonstrate that donor sites are achievable locally.

The rates we identified are the total payable not an annual sum. The process of payment is not detailed in the legislation and will depend on the detail of the agreement between the landowner, the developer, and the Local Authority. Previously, the system has been that a trusted third party has held the funds and an amount has been paid at the start to cover the cost of establishment and the capital loss in value with further payments through the term to cover maintenance work. There is some logic to this but, at the moment, the actual delivery process for BNG is not set and one can see the position where a landowner receives the whole payment at the start of the 30 years, signs up to a conservation covenant and is bound into that agreement. The follow up point would be – what happens in year 15 when the land is sold? The logical answer is that the buyer will take the land on subject to the conservation covenant along with the liabilities that go with that, and will value the land parcel accordingly – so long as the first owner got sufficient compensation to cover the loss in value that seems logical and fair.

Where habitats are secured by conservation covenants, responsibility for monitoring and enforcement would sit with the Responsible Body that holds the covenant. Conservation covenants can be enforced through the courts by the parties to the covenant agreement. There is no intention to transfer the role of enforcing conservation covenants to a public body or a third party.

Conservation Covenants or other BNG securing agreements will be taken into account by a valuer, just like any other issue.  At the outset, it will downgrade the value of land as a restriction and, in the fullness of time, the market will show us what it is prepared to pay for land subject to this restriction. Looking at the examples I used in the presentation, the arable to grassland example will be treated as a block of land that, for the foreseeable future, has to remain grassland, without any ability to provide other value enhanced schemes (solar etc). As in every case, this will depend on the detail of the agreement in place.