Q: I have been reading a lot recently about forestry being a good investment. Do you have any to pay Stamp Duty on woodland? And what legal aspects should I be aware of?
A: Woodland ownership has definitely become more popular as it offers a number of tax benefits. Commercial managed woodland qualifies for 100% Business Property Relief after two years of ownership and is exempt from Inheritance Tax on the total value of the land and trees when the owner dies. In addition, income from the sale of the timber in commercial woodlands is exempt from both income and corporation tax.
Stamp Duty (Stamp Duty Land Tax in England and Land Transaction Tax in Wales) on woodland is based on the purchase price / lease premium or transfer value. In both England and Wales SDLT is 0% up to £150,000.00 and 2% for £150,001.00 to £250,000.00. Over £250,000.00 in England it is 5%, but in Wales it is 5% for £250,001.00 to £1million and then 6% above £1million. Unlike residential property under £300,000.00 being free of SDLT for first time buyers, SDLT on woodland and forestry applies to first time buyers.
An important consideration when purchasing woodland is to determine whether under The Countryside Rights of Way Act 2000 (CR0W) you must allow uninterrupted public pedestrian access over your site. If such a requirement exists it can be costly as you would need to have adequate public liability insurance, carry out regular risk tree safety assessments and carry out any tree safety work the assessments deem necessary.
There are many other aspects you should be aware of, such as capital Gains Tax implications. Commercial woodland is not exempt from Capital Gains Tax as opposed to the other taxes referred to above. It would therefore be advisable to seek advice from a law firm such as ourselves that has a team of commercial and agricultural specialists.