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.
The old English Woodland Grant Scheme has now closed and a new grant system will be introduced from February 2015, with agreements and payments starting from 2016. This is to be called Countryside Stewardship (no longer NELMS), and will broadly focus on biodiversity and water quality.
A woodland management plan will be an essential pre-requisite for funding applications, and will have a funding contribution of at least £1000, as a capital grant. The majority of the scheme will then be competitive, with funding going to those that will give greatest benefit. There will be a system of annual woodland improvement payments, based on area and agreed outcomes, to run for a 5 year term, and worth £100 per hectare. There will also be supplementary capital grants for a range of individual items, including woodland creation. Infrastructure projects such as access will be paid at 40% of cost. There will be no more time based payments, such as forest craftsman (e.g. for stalking), or agent.
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.