Small Woodland Owners' Group

Woodland and inheritance tax

Paperwork, grants, legal issues

Postby Neil » Sat Mar 17, 2012 7:12 pm

I understand that 'commercially run' woodland is exempt from inheritance tax, and if this is so, it is clearly an attractive notion. The woodland which we currently own is only three-and-a-half acreas in extent and is managed as a nature reserve, so there's no commercial element to it. However, it occurred to me that if we were to buy, say, 10 acres of grassland and plant trees all over it with the declared intent of harvesting the timber in due course (which would probably be in thirty or so years' time, by which time we'll be long gone) our children will have a useful pension based on the sale of the timber (not to mention the value of the land), and will have avoided paying inheritance tax on the woodland we have created and passed on to them. In addition, we shall have the pleasure of creating a new woodland. Am I right? Where's the catch?


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Postby Hobby » Sat Mar 17, 2012 9:25 pm

Hi

Quick thought, the value of pasture/farmland is much more expensive than woodland.

Your newly formed 30 year old woodland, would, I suspect have lost much more value

than that gained by avoiding inheritance tax.

I wasn't aware the exemption was based on commercially run woodland to be honest, best I check the loopholes on that one.

Hobby


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Postby Neil » Sun Mar 18, 2012 4:31 pm

Thanks, I thought there had to be a catch. With regard to the proviso that the woodland must be have been commercially managed in order to qualify for inheritance tax relief, I got this from the woodland.co.uk website, where it says that "if the woodland can be shown to have been commercially managed, it will be free of inheritance tax once you have owned it for more than two years." Quite what "comercially managed" means, or what one has to do to show that it has been commercially managed, I'm not sure.


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Postby Neil » Sun Mar 18, 2012 5:04 pm

Further to my last post, I found some useful information on the Daily Telegraph website, telegraph.co.uk. On 22 April, 2006, Stephen Spurdon wrote an article entitled “Try an onshore tax haven”.


However, I am becoming increasingly confused about the whole business. On the website woods4sale.co.uk it says that “Forestry qualifies for 100% relief from IHT once you have owned it for more than 2 years. This includes the value of the land and the trees,” but on the (presumably authoritative) website of HMRC (hmrc.gov.uk) it states that “When you die, the beneficiaries of your woodland can ask that the value of the timber - but not the land - be excluded from your estate. However, when the timber is sold, the beneficiaries may have to pay Inheritance Tax on the value of the sale unless it also qualifies for relief.”


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Postby Hobby » Sun Mar 18, 2012 8:10 pm

You could of course, " gift ", the woodland or any other asset for that matter to your children now , only in name of course !!.

Assuming you don't die within 4-7 years ( the inheritance tax levy reduces during this period proportionately) the beneficiary would not be subject to inheritance tax. ..

Most people would be very surprised how easy it is to avoid paying inheritance tax if you put plans in motion early enough and have honest and trustworthy children !!!!!!!!!!!!!!!.

Hobby


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Postby bat » Sun Mar 18, 2012 10:53 pm

Hello, my interpretation is that if the wood is run as a commercial forest, it would qualify for agricultural relief, i.e. full IHT relief. If you run it for leisure, then the thing about only the timber possibly being IHT exempt, would come into play.


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Postby davetb » Mon Mar 19, 2012 8:34 am

We bought our woodland through Clegg's and on the contract of sale we paid about 90% of the price for the trees, and 10 % for the land. It made no difference to us, as private family buyers. It sounds like it may make a difference 'down the line'.


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Location: Cardiff ( woodland is near Monmouth )

Postby bat » Mon Mar 19, 2012 2:37 pm

Cunning move..... and to correct my earlier post on commercial forestry (e.g. woodlands run by managing agents for profit, etc) the following (from somewhere else on the internet) would apply...


Commercial woodlands attract 100% Business Property

Relief provided that they have been owned for at least 2 years prior to being

transferred or on death. Woodlands of outstanding scenic, historic or scientific

interest may qualify for Heritage Relief allowing a conditional exemption from

IHT.


Actually, there's a lot more of interest in the full document which is here...


http://www.forestry.gov.uk/pdf/ForestryandTaxation.pdf/$FILE/ForestryandTaxation.pdf


.... although being from 2003, it may be a bit out of date!


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Postby woodbodger » Tue Mar 20, 2012 6:45 pm

Have you ever thought that if you stipulated in your will that your coffin be made out of timber from your wood you could at least take some of your carefully garnered gains with you!


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Postby Binz » Wed Mar 21, 2012 9:42 am

and you could even be buried in your woodland http://www.igreens.org.uk/burial_on_private_land.htm


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