Can’t See the Wood for the Trees…

5th December 2022

Google ‘planting woodland and trees’ and you will find dozens of pages of advice but let’s focus on the farmer’s needs and the wide range of benefits to our readers where farmland grazing is poor or your land requires more fertilisers.

 

Large scale planting can:

• Attract wildlife

• Provide shelter for livestock

• Prevent soil erosion

• Cover crop

• Manage water

• Generate income

 

These prompt a second list. Timber is in high demand both now and into the future Can’t See the Wood for the Trees… and you could benefit from short- or long-term revenue streams:

• Planting and harvesting fast-growing trees on a frequent cycle.

• Local wood-fuel production for on-farm energy savings or sales income.

• Products like – Christmas trees, construction, furniture, fencing and chippings.

• Recreation and leisure activities, glamping, shooting and off-road biking.

• Selling fruits and nuts.

 

Inevitably there are tax issues.

 

Commercial occupation of woodlands is free of both Income Tax and Corporation Tax.

 

Extra income received from woodlands is taxable in the normal way like any profits from other land-based activities.

 

Whilst income from the sale of timber and most grants received is tax free, there is no relief for any associated expenses.

 

Woodland transactions in a farming business must be carefully identified to ensure the correct tax treatment and, if you make any losses, these cannot be offset against other income.

 

There is also an exemption from Capital Gains Tax (CGT) for the value of growing timber. If an area of commercial woodland is sold, the value must be split between
the land itself and the trees on it. It is only the increase in the value of the land that is subject to CGT.

 

The sale of growing timber is standard rated for VAT purposes. This means that when timber is sold by a VAT-registered business, VAT needs to be added to the
price. Similarly, VAT incurred on costs of planting and maintenance can be reclaimed.

 

Lastly, Inheritance Tax. Woodlands can qualify for either Agricultural Property Relief (APR) or Business Property Relief (BPR).

 

 

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