Woodland Income and Economics
Woodland management and restoration can be profitable. Economic advantage covers not just income, but adding value to the woodland as a property, tax advantages including Inheritance Tax, and potentially improved sport and amenity use.
In most managed woodlands there may be a reasonable volume of timber lined up for annual operations and sales. Even in previously unmanaged woods, there may be a surprising marketable component. For example, it may be many decades since a coppice compartment was last cut, with stems large enough for milling. Other work such as installing new rides, overdue thinning, or improving genetic quality can result in butts being available for planking by mobile or local sawmills. This is likely to yield at least double the price paid per tonne compared with firewood, or much more, depending on species and quality.
Strong demand for hardwood firewood has been raising prices paid to woodland owners. In fact, firewood has become surprisingly profitable over the last few years. Under-managed woodland often has an accumulation of increasingly valuable firewood for the local market. This is therefore a good time to plan for woodland restoration, since firewood sales and grant funding will pay for the establishment of a new age class of trees.
Low value produce from woodland will usually at least find a place in the woodfuel market. At current prices, the costs of felling, extraction and transport is likely to be covered. This provides a relatively new and important incentive for timely thinning of plantations and good woodland management.
A positive funding structure to help with woodland management is available from the Forestry Commission. Grant is paid in recognition of the fact that we all benefit from well-managed woodlands, but acknowledges the need for encouragement. English Woodland Grant Scheme funding makes an important contribution to woodland economics. Applications for funding are tailored to meet the individual needs of specific woodlands.
Much of the current round of grant funding in England has been rolled forward to the end of September 2014. Existing Forestry Commission budgets for Planning, Woodland Improvement Grants as well as Woodland Creation are still available for new applicants. It is expected that some time in 2015 there will be a renewal of the English Woodland grant Scheme. However it may have a different name, and there may be a greater incentive for annual management payments based on area and agreed outcomes. One important change is that the management plan is to be an essential pre-requisite for funding applications.
Help from the Tax Department
Ojectives often include a commercial element. There are tax advantages to managing woodland as a business.
Once woodland is managed as a business, it is eligible for Commercial Property relief at 100%. However it is worth bearing in mind that to be eligible, two years must elapse following purchase.
The income and profits from timber sales in woodlands managed commercially are free from both Income and Corporation Tax.
Capital Gains Tax
The gain in value of timber as it grows is entirely free from tax. Only the increase in the value of land is assessed for CGT. For this however, indexation and taper relief are available.
Markets and budgets
While the aims and objectives of woodland management are a central part of planning, global timber markets fluctuate year by year.
We can help forecast, order and manage the budgets involved in planning, thinning, harvesting and planting operations.
Woodland management is regulated by the Forestry Commission through a complex system of standards, grants and licences.
The job of woodland management usually involves consultation, including with the Forestry Commission, inventory and planning, grant applications, contract or work establishment and monitoring, sales, and ensuring regeneration. Time spent on this work is greatest in the first year, while establishing plans and procedures for the following years.
The Forestry Office can provide staged budget forecasts as woodland data is collated. Following an initial visit, an assessment of profitability can be given for the first and subsequent years, accounting for sales, grant funding and management costs.
Small pieces of consultation work are established over the phone and charged at an hourly rate.
The Forestry Office
improved economic benefits, and attention to detail.