With changes to reliefs or exemptions from IHT and Capital Gains Tax signalled by the Labour Government in the October budget it has never been more important to make sure your woodland is correctly managed.

Currently to attract tax relief woodlands must be “commercial woodland”

What is a commercial woodland?

The Confor Business Property Relief Guidance Notes for Commercial woodlands from 2016 gives the best explanation. There is no definition of a commercial wood but the income tax guidelines explain that “the occupation of woodlands is commercial if the woodlands are managed on a commercial basis with a view to the realisation of a profit”

Where HMRC challenge the commerciality of a woodlands business on the grounds that the business is being carried on “not for gain” especially if no income is received for several years or that it is merely one of holding investments.

Neither of these accusations if proved would allow the tax reliefs for commercial forestry to be applied”

What can you as a woodland owner do to demonstrate commercial occupation;

• Have evidence of active management by a professional forester or land agent
• Have a woodland management plan with felling permissions in place
• Document and record all activity in the woodland, repairs to fences, clearing fallen trees, cutting rides, weeding young trees should all be recorded and costed
• Record removals of timber from the woodland, even for firewood.
• Prepare simple management accounts for the woodlands
• Have a separate bank account in the name of the owner of the business
• Vat registration or inclusion of the woodlands in a VAT registration in the name of the owner

Critically, think carefully about the intent to realise a profit, talk this through with your woodland manager make sure this is embedded in your management planning, woodland operations, choice of species and any grant applications.

Managing woodlands for biodiversity, shooting or to provide shelter without a proper intent to grow trees for timber including firewood may in the future not be enough to attract Business Property Relief.  

Please contact Oliver Combe for advice on how to best manage your woodland.

01904 489 731