What is Natural Capital?
Natural capital refers to the intrinsic value that can be ascribed to land in terms of the value that it can provide the environment and wider society.
Traditionally, the value of natural capital has been largely overlooked as it was not possible to measure or monetise it. However, a number of growing marketplaces allow landowners to derive real value or cashflows from the natural capital of their land and this is now being reflected in many commercial sales of land.
Natural Capital Accounting
Basic Payment Scheme
The withdrawal of the Basic Payment Scheme (BPS) is forcing landowners to focus on alternative ways of maintaining and maximising the cashflows and value of their land. There remain many ‘traditional’ forms of diversification, but there is now sufficient value in the natural capital marketplace that it cannot and should not be overlooked. It has been estimated that the value of the UK land-based carbon credit market could equate to as much as £1.7 billion annually by 2050.
We work alongside clients and their advisors to help them navigate this evolving world, helping businesses assess what they need to be doing to maximise the opportunities that are arising and understand the wider implications that these decisions may have on tax planning.
Carbon reporting
Natural capital, carbon accounting and carbon credits, ESG and sustainability are terms increasingly used in the press and business world; yet there are many branches to this area.
There are now carbon reporting requirements for large incorporated businesses. This increased accountability and focus on carbon usage is helping to continue to drive the carbon offsetting market place. This is no accident as it is one of the main levers which the government are using to deliver its ‘net zero’ targets. This ever-increasing demand for offsetting is providing opportunities for landowners who are able to plant trees and other carbon sequestering activities to help service this marketplace.
The carbon market (dominated by the Woodland Carbon Code and the Peatland Carbon code) is not the only option for landowners wishing to generate value from their natural capital. There are opportunities in ‘ecosystem services’, bio-diversity net gain and other forms of offsetting such as nitrate offsetting.
The introduction of the Environmental Land Management Scheme (ELMs), which has a mantra of ‘public money for public goods’, also rewards land managers for managing land in and environmentally beneficial manner.
Taxation of natural capital
There are a multitude of differing tax considerations for those embarking on natural capital projects, both for the landowner and other parties involved.
We advise landowners and other businesses active in this evolving sector, working with them to maximise their profitability, minimise their tax liability and ensure they remain compliant.
Via our extensive network of contacts in the sector, including the Country Land and Business Association (CLA) and Scottish Land & Estates (SL&E), we keep up-to-date with important issues and are able to give clients an inside track on the development and implementation of forthcoming legislation and its potential impact on their business.
We are also ensuring that we are leading the conversations on the taxation of this sector both through direct representations to HMRC, DEFRA and via active membership of professional bodies such as the Rural and Farming Group of the ICAEW.
Natural capital and the future of ecosystem services with Dr Rich Stockdale
David Chismon and Peter Harker sat down with Dr Rich Stockdale of Oxygen Conservation to discuss his mission to scale conservation and how the natural capital model makes it possible “for nature to pay to protect itself”.
Watch the full interview
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