Forestry investment and investing in commercial woodlands

Forestry Investment – Investing in Commercial Woodlands

For many property and land investors investing in commercial woodlands and forests is becoming more popular by the day. The concept around forestry investment is not new but attracts significant investor interest because it is considered to be one of the most tax efficient ways to invest in land in the United Kingdom.

The UK is known for its lush greenery, rolling hills, and vast forests and woodland areas, and it is this that makes our great country stand out from the crowd.

Little wonder then that so many land investors and speculators want to own a slice of our green and pleasant land to add to their investment portfolios – as well as making a profit at the same time.

UK land investments have always been popular with astute investors with demand often outstripping supply.

That being said however, it is still possible to buy land, commercial woodlands and managed forests as an investment opportunity, and while it is not common knowledge the likelihood of a successful investment outcome is improving all the time.

Investing in Commercial Woodlands

When you delve further in to the detailed financial mechanisms around investment in land and property you will discover that one of the most tax efficient ways of doing so is to invest in the commercial woodlands and forests, which can be found up and down the country, but primarily in the north of England, Scotland and Wales.

Commercial pine forests in particular are especially alluring for forestry investors, and probably offer more in the way of a successful return.

The main reason for this? Pine forests reach commercial maturity in about 40 years… after which time they are then cut down for timber which is then sold… the land is then usually replanted with new pine trees and the cycle is repeated.

Currently, there are significant tax incentives for investors in commercial woodlands and forestry investments from an income tax, capital gains tax and inheritance tax perspective.

Forestry Investment Funds

Of course many investors will know that investing in land, especially commercial forestry does not come cheap, however many private investors who recognise the benefits of forestry investment are now investigating alternative opportunities such as indirect investment, including forestry investment funds.

In the UK forestry investment funds potentially offer an excellent way for investors to access commercial woodland investment opportunities without the considerable financial outlay associated with the direct investment approach.

This type of indirect investment approach to forestry investment is fairly straight forward.

Forestry investment funds operate formal investment vehicles that are based on commercial forestry opportunities, similar to real estate investment trusts (REITS).

Such forestry funds offer their investors exposure to and the management of commercial forestry opportunities that have investment potential.

What are the Tax Benefits of Commercial Woodland & Forestry Investments?

With regard to tax however, what is particularly advantageous about investing in commercial forestry and woodland opportunities are the tax benefits that are currently available.

For UK taxpayers it is currently possible to invest in commercial woodlands and receive an income from the subsequent timber sales completely tax free.

Additionally, the sale of the woodland timber, but not the land is also capital gains tax free.

  • Capital Gains Tax

    Any increases in the value of the timber as it grows are free of capital gains tax (CGT).

    However, you should note that this does not apply to any increase in the value of the land itself which is subject to capital gains tax at the point of sale in the normal manner.

    You can also rollover capital gains into the purchase of commercial woodlands, and if you sell it then any gain held over will not become payable until you sell the woodlands – restrictions to rollover relief do apply in that only certain gains can be rolled over.

  • Income Tax

    Currently for UK tax payers any income generated from commercially managed woodland is free of income tax.

    The same is true for forestry investment companies who will pay no corporation tax.

  • Inheritance Tax

    If you have owned your commercial woodland or forestry investment for more than two years then you will qualify for 100% relief from inheritance tax, which includes both the value of the trees and the land.

Forestry Investment & Investor Risk

Finally, despite the attractive investor tax incentives associated with forestry investment and commercial woodlands, like any other opportunity, whether it be property, land or commercial forestry, investors should always carefully examine the investment opportunities presented to them, reviewing both the risks and rewards to satisfy themselves that it is the right investment opportunity for them.

Specialist Land & Property Investment Solutions

As a leading independent property and land investment specialists Investment Property Partners offer expert advice and support to clients across our specialist areas of expertise helping them to achieve their investment objectives.

If you are a property investor searching for investment opportunities including commercial forestry investments please contact us today to discuss how Investment Property Partners can help you.

Further reading…

More information about forestry investment… here →

More information about commercial woodland taxation and valuation… here →