A Brief Guide to Forestry Taxation

Many people are becoming more aware of the vital role that forests and woodlands play in our lives and they offer a wide range of benefits for both our physical and mental health. Establishing new woodland also provides further advantages, including environmental improvement and carbon capture and storage.

For anyone who needs further convincing of the importance of woodland, there are also many tax advantages for commercial forestry owners. Investing in woodland creation can be an efficient way to manage your taxation both now and in the future. UK taxpayers investing in commercial forests and woodlands in the UK can benefit from a number of tax advantages, so if you want to find out more, read on for our handy guide.

Income Tax

Income generated from commercially managed woodlands (such as timber sales) is exempt from both income and corporation tax. However, additional incomes from the ownership of the land, such as shooting rents, will be subject to income tax.

Capital Gains Tax (CGT)

If forest or woodland is managed on a commercial basis, any increase in the value of trees (through growth or timber price rises) is exempt from capital gains tax. Owners may also be able to make further savings by offsetting the cost of capital improvements (e.g roads or fences) against the increased value of the land. You may also be eligible for rollover relief, where CGT liability from the sale of a business asset can be rolled over into a commercial woodland investment.

Value Added Tax (VAT)

Owners of commercial woodland are eligible to register to reclaim VAT on expenditure. This includes expectations of future taxable expenditure for forestry operations, as there may be long periods where owners haven’t purchased any taxable supplies. Many woodland creation specialists offer a VAT administration service as part of their wider forest management package.

If you’re thinking about investing in commercial woodland, get in touch with the team at Woodland Creation Scotland. Our experts are on hand to talk you through the many benefits that come from establishing new woodland and we can work with you to create a bespoke plot to suit your needs. For more information about forestry taxation or to discuss your requirements, don’t hesitate to give us a call today or visit our website.

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