Uncertainty around tax treatment in relation to Biodiversity Net Gain


We hear a lot about Biodiversity Net Gain (BNG) but what is it and what might you need to be aware of?

BNG is a policy aimed at enhancing and preserving biodiversity during development projects. The goal is to leave the natural environment in a measurably better state than before.

Statutory framework

In England, BNG is required under a statutory framework introduced by Schedule 7A of the Town and Country Planning Act 1990 (inserted by the Environment Act 2021).

This framework mandates that every grant of planning permission includes a condition for achieving a minimum 10% increase in biodiversity value relative to the pre-development biodiversity value of the onsite habitat.

The increase can be achieved through onsite biodiversity gains, registered offsite biodiversity gains, or statutory biodiversity credits.

Biodiversity gain objective

The biodiversity gain condition is a pre-commencement condition. After planning permission is granted, a Biodiversity Gain Plan must be submitted and approved by the planning authority before development begins.

The objective is to deliver at least a 10% increase in biodiversity value compared to the pre-development state.

Biodiversity gain can be achieved through various means, including habitat creation, restoration, and enhancement.

Statutory biodiversity credits

Developers can achieve BNG by purchasing statutory biodiversity credits. These credits represent biodiversity improvements made elsewhere (offsite) to compensate for any loss on the development site.

The credits are generated through habitat creation or restoration projects approved by the relevant authorities.

Tax treatment related to BNG

The position remains uncertain and whilst we await more detailed guidance from HMRC we must rely on current legislation and relevant case law. Every case will need to be looked at on it’s own merits.  

Whilst the 2024 Spring Budget provided some welcome clarification for the treatment of environmental and rewilding projects regarding the availability of Agricultural Property Relief, there is still much to be clarified. How much more guidance we will see in the coming months is a moot point, and with a new Government in place following the General Election, it is highly unlikely that there will be further development of the specifics for the time being.

With regards to BNG, where a property developer makes a one-off payment, that cost is part of the building work but for the person who is creating the new habitat, the position is less clear. Is it trading income and can the income be spread over the period of the agreement. Is the work on the land husbandry and therefore can the income in the hands of the habitat creator be considered trading income using the established definitions? The devil will be in the detail and each case will have to be reviewed on its own merits whilst we await further guidance. One size certainly will not fit all.


If you would like advice and support about BNG and the tax treatment please get in touch. Call 0808 144 5575 or email help@armstyrongwatson.co.uk.

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