Managing woodland can reap tax benefits, says Yorkshire expert

Yorkshire farmers and landowners with woodland can make significant tax savings if it is used for the commercial production of woodchip for a biomass district heating system.

Biomass uses agricultural, forest, urban and industrial residues and waste to produce heat and electricity with less effect on the environment than fossil fuels.

With heating production accounting for almost half the UK’s energy demand and with the Government aiming to increase the amount of heat generated from renewable resources, such as straw and woodchip, from one percent to 12 percent by 2020, many farmers, landlords and commercial enterprises are considering heating their premises with wood-fired distributed heating systems.

If woodland is managed for woodchip production it should be considered a business asset by the HMRC says Tom Whitehead, senior associate on the rural team at the Harrogate office of property consultants Carter Jonas.

An Entrepreneur’s Relief is then available, which reduces the tax rate from 28 percent for a higher rate taxpayer to 10 percent.

Mr Whitehead said:

“There can also be significant savings in terms of Inheritance Tax.

“While smaller copses and woodland belts may be considered ancillary to farming activities and benefit from Agricultural Property Relief, larger blocks of amenity woodland can only benefit from Woodlands Relief.

“This allows the value of the timber in the wood to be deducted from the taxable estate. However the value of the underlying land remains a taxable asset.

“If the woodland is managed for woodchip production, it is a trading asset that can benefit from Business Property Relief of up to 100 per cent.”

Mr Whitehead said there were several different grant streams through The English Woodland Grant Scheme run by the Forestry Commission, but as the eligibility criteria and project economics were complex, he urged anyone interested in developing biomass opportunities for their sites to contact a member of the Carter Jonas energy team who could give detailed advice.

Tom Whitehead 017
Carter Jonas’s Tom Whitehead

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