The importance of knowing whether you have commercially occupied woodland or not comes back to tax as the commercial occupation of woodland with an end result to profit is actually exempt from both income tax as well as corporation tax.
Understanding what classes as ‘commercially occupied’ is a much more complex and comes with a range of limitations and exceptions. But what is crucial is that HMRC does not take into long-term nature of forestry, so with this in mind, it has said that it is not necessary to show profits immediately to demonstrate that a forestry business is run on a commercial basis.
Moreover, it is certainly advisable to keep a woodland management plan showing how and when income is expected just in the scenario that HMRC enquiries with you. Moreover, it is worth noting that no relief is available for losses suffered regarding commercial woodlands, and capital allowances cannot be claimed on spending on plant and machinery connected with commercial woodlands.
Limitation on exemptions
There are several limitations to the exemption and it cannot be assumed that all commercial activities on woodlands are exempt from income tax or from corporation tax.
Examples of limitation:
- If your land is predominantly occupied for farming purposes. Receipts from felled timber from trees planted on farms will not be covered by the exemption and will be taxed as farm income.
- Income from short rotation coppices like willow and poplar is classed by HMRC as income from farming other than commercial woodlands.
- The same is applicable to any profit generated from growing Christmas trees. But Christmas trees produced by selling the tops of felled trees from commercial woodlands or thinnings from land being prepared for forestry would be covered by the exemption.
We all know that Here at Woodland Creation Scotland, our team are experienced and have successfully taken woodland creation schemes which gives confidence to the purchasers and a financial return to the owner. To find out more about the various services we offer, please don’t hesitate to contact us, we’d be delighted to help.