Frequently Asked Questions about Forestry and Woodland Investment

Woodland ownership offers a number of tax efficient benefits.  These include:

Business Asset Relief from Inheritance Tax (IHT):
Woodland managed commercially qualifies for 100% Business Property Relief (BPR) once held for two years.  If held at death there is no IHT payable on the total land value of the land and trees.  Any Capital Gains Tax (CGT) liability on the asset which has been held over or rolled over will be extinguished.

Capital Gains Tax (CGT):
The value of the growing timber crop is currently exempt from Capital Gains Tax.  However, any increase in the value of the underlying land from the date of acquisition until the sale of the property will be taxed without indexation at the current CGT rate - see the HMRC website for details of current rates.

It is important to demonstrate that the property has been managed as a commercial investment to qualify.  It should also be noted that the land value is not a fixed percentage whatever the total value.  We strongly advise taking advice on land values and thence capital gain before selling a forestry asset.  Tustins would be pleased to help in this capacity.

Capital Gains Roll Over Relief:
There is a clear opportunity for those who have a CGT liability arising from the sale of a business asset. By rolling over into another qualifying asset - forestry land - CGT liability can be deferred.  By holding the forest until death the estate is assessed for inheritance tax and the CGT liability is extinguished.

Tax Free Income:
Income generated from the sale of timber from the ownership of commercial woodlands is exempt from both income and corporation tax.  No tax relief is available on development costs or interest payments, and no income tax is payable on income generated from a timber crop or on the sale of an entire plantation.

Please note that this information is for general guidance only.  Prospective woodland investors should take more detailed advice from their accountants.

England and Northern Ireland
In England and Northern Ireland woodland is sold under exactly the same tax rules as residential property, except that the cut off points vary.

Based on the purchase price/lease premium or transfer value (non-residential or mixed use) the
Stamp Duty Land Tax (SDLT) rates (including first time buyers) are as follows:

Rates take effect from 17th March 2016:

• Up to £150,000 - Zero %
• £150,001 to £250,000 - 2%
• Over £250,000  -  5%

For more information go to: HMRC


Scotland
In Scotland the Land and Building Transaction Tax (LBTT) is charged as a progressive tax. The percentage rate charged on the actual price of the property is applied to the value that falls into each band and up to that threshold. Woodland and agricultural land is treated as non-residential property and the following rates apply:

• Up to £150,000 - Zero %
• Over £150,000 to £350,000 - 3%
• Over £350,000 - 4.5%

For more information and to use the Scottish Government LBTT Tax Calculator go to: LBTT Tax Calculator

Wales
In Wales Land Transaction Tax (LTT) is payable on any land transactions in Wales. LTT is operated by the Welsh Revenue Authority.
Rates take effect from 1st April 2018:

• Up to £150,000 – Zero %
• 150,001 to £250,000 – 2%
• £250,001 to £1,000,000 – 5%
• Over £1,000,000 – 6%

For more information go to the Welsh Revenue Authority

This is a common problem experienced by many purchasers. Tustins strongly recommend that purchasers and vendors alike engage a solicitor who is experienced in dealing with land and woodland sales. Contact our office for further advice.

A felling license is required for all felling where the trees to be cut are greater than 7cm diameter at 1.3m. An owner may fell up to 5m3 of timber greater than 7cm in any one calendar quarter. To obtain a license please visit the relevant website of NRW (Wales), FC England or FC Scotland.

As with all land it is advisable that adequate public liability insurance is taken out on any woodland or land owned by you. Woodland owners can also benefit from forestry specific insurance to cover woodland risks such as wind and fire damage. We are happy to provide more detailed advice on request.

Tustins as selling agents to the property are unable to provide purchasers with advice to help them make up their minds on forestry or woodland matters. However, we are happy to discuss general forestry and UK market matters with purchasers on an informal basis and our woodland property advisors will be only too happy to speak in person or over the telephone. Of course if we are not acting for the seller we are happy to provide our acquisition service. Just give us a call to discuss further.

Forestry has long been a business that has had many non cash benefits.  In todays Climate Emergency and more crowded environment people are looking at ways of offsetting many of the issues that we are currently faced with and Forestry and woodland ownership has a cash positive role to play in this.

Most of the interest and highest priority is in Carbon offsetting followed closely by Flood alleviation and Public Access.

Carbon offsetting and Forestry is where the many of the top FTSE companies are currently focusing their energies.  It is already possible to trade the carbon offsetting potential of a new woodland and so far I have already been personally involved in the sale of a forestry asset without its carbon rights.  As such it is logical to assume that carbon rights and offsetting could well have cash generating role in any new forestry or woodland planting investments.

Flood alleviation is  just slightly behind carbon offsetting in terms of cash values to a woodland owner.  It is no mistake that if you wander into thick woodland cover in heavy rain it takes a long time for the rain to hit the ground.  There are people who believe that recent flooding events around the world could have been reduced if forestry and woodland cover is increased intelligently.  In the UK we are already seeing articles in the mainstream press and within government agencies backing the call for smart planting in some upland areas of the UK.  We are expecting to see enhanced grant aid or perhaps adminstrative support for certain afforestation schemes in set areas.

Public Access a long debated and controversial subject for woodland owners is an area where a woodland owner can generate substantial income from if handled correctly.  Opposition comes only from restricting informal access but support comes to an owner who can offer facilities for peripheral businesses that support the public enjoyment of the countryside and create all the health benefits we know about.

The selling of woodland with the sporting rights reserved out of the title is quite common, and some sporting reservations go back for many decades.  Sporting rights exist where a landowner sells off part of his land, but reserves the right to come on to the sold off land in order to exercise sporting rights.  They are held for all time by the owner and his descendants no matter how many times the woodland is sold, unless he or she can be persuaded to sell them on.  Sporting rights generally refers to pheasant and/or snipe shooting, and the pheasant shooting season runs from 1st October to 1st February.  The woodland owner is allowed to control pests which damage the trees and these include deer, pigeons and squirrels. Such control can be done at any time, with the proper safety measures in place.  For safety reasons the woodland owner and the owner of the sporting rights normally liaise with each other so each is aware of when they are in the woods.