Buying woodland for tax reasons

dllive

Hi all,
Id like to buy some woodland (about 1 acre). I will use it to walk in, take photos and generally to a have the space.
I heard someone say that you can offset what you spend on woodland against tax - in fact this is the primary reason to buy woodland. Is this correct? Someone else told me that you dont pay inheritance tax on woodland, so lots of old people buy it. Is that true also?
Ill probably buy it whatever, but if I can offset it against my tax then so much the better!
Thanks

p00hsticks

It's rarely (never?) sensible to buy anything just for tax reasons - 'letting the tail wag the dog', - although in your case this sounds as if it's something you want to do for other reasons.

I can't comment on the tax, but you may find this website helpful if you haven't come across it already

http://www.woodlands.co.uk/

(It's something I've also considered myself in the past)

Pennywise

Buying woodland won't reduce your income tax from your employment/self employment, and won't create a tax refund.

The "profits" from selling the wood may be tax exempt.

When you sell the woodland, the value of the land may be exempt from Inheritance tax (IHT) (but there may be no IHT anyway depending on the value of all your assets when you die), but the value of the wood probably won't be exempt from IHT.

So, basically, if you're just buying it for enjoyment rather than as a business to harvest the wood, then probably no tax benefits.

Regardless of tax, have you factored in the costs of maintaining the wood? You'll have to keep it safe and fell/trim the trees occasionally. Tree fellers can charge hundreds to trim/fell an average sized tree. You can't let it fall into disrepair as if anyone was injured, you'd be responsible - that's another thing - you'd need insurance - it may be more expensive than you'd imagine.

00ec25

Pennywise wrote: »

When you sell the woodland, the value of the land may be exempt from Inheritance tax (IHT) , but the value of the wood probably won't be exempt from IHT..

surely you meant the other way round ...?


When you die, the beneficiaries of your woodland can ask that the value of the timber - but not the land - be excluded from your estate. However, when the timber is sold, the beneficiaries may have to pay Inheritance Tax on the value of the sale unless it also qualifies for relief.
If the woodland qualifies for Agricultural Relief, Woodland Relief may not be available and you should claim Agricultural Relief instead. Business Relief may be available on woodland that qualifies as a business asset.
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/iht-reliefs.htm#3

and

http://www.hmrc.gov.uk/manuals/ihtmanual/ihtm23208.htm

dllive

Thanks guys. Thats a shame about not getting tax relief. I suppose if that was the case then everybody would be buying it! I had envisaged the ongoing costs of owning the woodland (although hadnt exactly worked out what these costs would be!). I think Ill need to think about it some more. Makes me wonder why people do buy woodland, Id imagine it would take decades to recoup the value of the investment. Thanks.

00ec25

dllive wrote: »

Thanks guys. Thats a shame about not getting tax relief. I suppose if that was the case then everybody would be buying it! I had envisaged the ongoing costs of owning the woodland (although hadnt exactly worked out what these costs would be!). .

many years ago investing in woodland was a tax write off and so needless to say that "loophole" was expoited by the "rich" and was therefore closed and so we have the situation today - it impacts IHT only

dllive wrote: »

I think Ill need to think about it some more. Makes me wonder why people do buy woodland, Id imagine it would take decades to recoup the value of the investment. Thanks.

yes but woodland is probably going to be held as a business asset (eg game bird shoots, paint ball venues) and so will have allowable costs or it will be under agricultural relief

woodland held purely for personal enjoyment is the preserve of the "rich" as there is no economic/tax sense in it

as for recouping the investment - i watched the 2 acre wood near me grow on my way to school, then came the 1988 storm and the 30 ft high tress were flattened. It remained stumps for the next 15 years and then was sold to its neighbour, the local church, who got permission to extend their car park on to half of it so the stumps were dig up and it was put down to whatever is the right way to describe the hardstanding that grass grows through so it still looks like a green field. The rest of the space is just dirt