Weekend reading

So, I\’ve some reading to do this weekend. On forestry subsidies.

Need some pointers to it all if anyone has any. I\’ve got Chapter 9 of Galloway and the Borders, so I\’ve got he effect on nature nailed down.

Now it\’s tax breaks etc that I\’ve got to mug up on.

Are there various audit committee reports? brochures from forestry companies telling of the riches to be made? Timelines of tax breaks?

11 comments on “Weekend reading

  1. HMRC manuals (joyful weekend reading).

    1) First the Income Tax exemption.

    Fairly simple – basically pure forestry is exempt, but since you’re unlikely to make a profit on it, that doesn’t do you much good (in fact it can be bad, because the exemption means you don’t get loss relief for the losses).

    Any aspects that might be profitable, they’ll try to tax.

    http://www.hmrc.gov.uk/manuals/bimmanual/BIM67701.htm

    2) Then the capital gains tax.

    More complicated – basically the trees are exempt, but the underlying land is taxable.

    http://www.hmrc.gov.uk/manuals/cgmanual/cg73200+.htm

  2. I looked at a fairly large Scottish woodland investment for a client quite a few years ago. The thing that struck me was that it was a very long term investment…the figures indicated no return for at least seven years.

  3. I am sure the Murph-meister must have advised a few of his wealthier clients to invest in forestry back in the day…

  4. 3) And here’s some inheritance tax.

    Much more complicated. There’s:

    a) agricultural property relief

    This completely exempts the woodland, including the underlying land, from inheritance tax. But woodland only qualifies for this if it’s an integral part of a larger farming operation (that’s what Julie’s article, above, was about), not if it’s a stand-alone operation.
    http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM24032.htm

    b) business property relief

    This again completely exempts the woodland, including the underlying land, from inheritance tax. But again, it’s difficult to qualify, because you need to have enough on-going activity to qualify as a business, which standard forestry doesn’t meet.

    Again, Julie’s article was partly about how to mix your forestry with other activities so that it does qualify as a business.

    c) a special relief for woodland

    Good because it’s specially for woodland, so it’s likely to qualify.

    But not so good because it’s only a deferral, not an exemption. So when you sell the trees, you have to pay the deferred inheritance tax.

    http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM04371.htm

  5. how far back do you need to go? Schedule B was abolished in 1988 – eg while growing the trees, you were taxed on 1/3(from memory) of the rateable value of the land – then when you chopped them down you went on to Schedule D case 6 eg income less direct expenses.

    The modern regime is summarised here:
    http://www.wildlife-woodlands.com/guide/woodland-taxation.htm

    or here:
    http://www.woods4sale.co.uk/taxation.htm

    or here
    http://www.wealthprotectionreport.co.uk/public/155.cfm

  6. According to Nigel Lawson’s account in “The View from Number 11”, the 1988 decision to exempt forestry from taxation was an elegant solution to the problem of the prevailing tax yield being negative: prior to that the Treasury was paying out more in tax relief on investment in forestry than it was receiving in total tax from the forestry sector.

  7. Alan…exactly….next to no tax take while the tress were growing and then CGT and tax exemptions when the trees were harvested, because of the costs. But you would need a tax specialist who practised aro9und the late 80s to supply the details.

  8. My advice: don’t waste valuable heartbeats on the cretinous stupidity of the public sector. Get down the Taverna and get a few in.

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