Farm Funding Scheme: What You Need to Know About Double Counting

Understanding the impact of diversification on farm businesses

Until now, farmers have simply had to show additionality for stacking publicly and privately funded schemes. However, recent changes may make this process more complex.

With significant changes affecting the agricultural industry, ranging from extreme weather conditions linked to climate change to evolving policies and tax regimes, diversification is becoming more crucial than ever for farm businesses.

At the Oxford Farming Conference 2025, Steve Reed reaffirmed the government’s commitment to three core principles shaping agricultural policy:

1. Food production.
2. Diversification.
3. Restoring nature in harmony with food production.

A key part of this strategy is the continued shift towards the Environmental Land Management scheme (ELMS), moving away from the basic payment scheme. This approach promotes the idea of ‘public money for public good’ and encourages private investment in conservation projects alongside government funding – commonly referred to as ‘blended financing’. One such privately funded scheme is biodiversity net gain (BNG), a way of creating and improving natural habitats for onward sale to developers.

DEFRA’s clarification on landscape recovery and BNG

In December 2024, Defra issued new guidance, specifically clarifying the position on using the funding pursuant to the DEFRA Landscape Recovery (LR) scheme (one scheme under the ELMS), alongside environmental enhancements designed to achieve BNG. The outcome has surprised many in the sector.

Double funding and additionality principles

When blending finance and stacking publicly funded schemes with privately funded schemes, the primary concern has always been to ensure that landowners are not being paid by both schemes for the same improvement.

The principle remains that landowners cannot sell an enhancement (such as a biodiversity unit or nutrient credit) that has already been funded by an agri-environmental scheme. Doing so would be considered double counting.

That said, it is still possible to use the same land to create further habitat enhancements (with the emphasis being on the word ‘further’). However, managing this effectively requires careful planning to ensure that each improvement falls within the correct funding regime.

Landscape recovery schemes

DEFRA’s latest guidance confirms that land enrolled in a LR scheme cannot also be used for a BNG scheme on the same land. This contradicts the usual additionality principle by introducing an outright ban on stacking these two schemes. This is a real blow for landowners who will no longer be able to use that particular blend of financing on the same parcel of land.

For LR schemes already in progress, the situation is particularly complex. According to DEFRA, there is currently no option to repay LR funding and switch to BNG. This means that if land is already in a LR scheme, land managers must wait until the end of the Project Development Phase of the programme before considering a transition to a BNG project.

Alternatively, landowners can opt to exit the LR scheme entirely, which would stop any further payments. However, if they choose this route, they will need to re-baseline to ensure that any new improvements are sold over and above the LR agreement.

Can LR funding and BNG ever be used on the same land?

While a direct combination of LR funding and BNG on the same land is prohibited, there are some instances where LR funding may contribute to ancillary works within a BNG project. For example, LR funding may be used for:

• New fencing for livestock.
• Public access works.
• Salaries of staff who are not directly involved in BNG projects.

Given the complexity of these rules, seeking professional advice is strongly recommended before proceeding with any blended financing plans.

What can farmers do?

The principle that farmers should be able to benefit from both public and private funding remains intact. However, with new restrictions in place, it is essential to plan carefully to avoid the pitfalls of double funding.

Before committing to any scheme, farmers should:

• Fully understand the terms and conditions of each funding stream.
• Ensure that any additional habitat enhancements are distinct from those covered by government-funded schemes.
• Seek expert advice to determine the most viable financial strategy.

Speak to our team

If you are considering how best to structure your farm’s environmental initiatives, our legal experts can provide tailored advice on funding schemes, contracts, and compliance requirements. Contact us today to ensure you are making the most of available opportunities without falling foul of double funding restrictions.