HMRC has released new guidance on the tax treatment of ecosystem service payments in the UK. This covers statutory schemes like Biodiversity Net Gain and nutrient neutrality, as well as voluntary carbon markets including the Woodland and Peatland Carbon Codes. The guidance provides clarity for landowners and developers on how payments for carbon sequestration and biodiversity enhancement are taxed, reducing uncertainty for those managing land based environmental projects.
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Finally. The lack of clear tax rules was a huge bottleneck for land based projects. It is good to see a distinction between statutory credits and voluntary carbon units, though the actual implementation will depend on how strictly they define the service provided.
True, but the real test is whether this makes the Woodland Carbon Code more attractive for institutional investors. If the tax treatment is predictable, the risk profile for these long term projects drops.
The 30 to 75 year commitments mentioned for BNG and nutrient credits are massive. I wonder how they handle the valuation of these assets on a balance sheet when the payment terms are spread over several decades.
