Can money grow on trees?

Both private and commercial investors still want to in invest in wood, despite the UK Government shelving plans to privatise 75,000 acres. Rob Steadman explores the issues.

The UK Government scrapped plans to sell off 75,000 acres of woodland after meeting with a hail of protest from action groups, such as 38 Degrees. There were fears that commercial companies would exploit the land and destroy Britain’s sylvan beauty.

The Government may have reversed the policy, but the potential tax breaks, still attract many wealthy investors, both commercial and private. With the future of the Forestry Commission under consultation, the fate of Britain’s woodland remains uncertain.

In the 1980’s the Thatcher Government introduced incentives allowing investments to be written off against tax. This encouraged celebrity investors, such as Sir Cliff Richard, Phil Collins and Sir Terry Wogan to buy their own little bit of the woods.

More recently, timber consumption in the UK is gradually increasing according to the Timber Trade Federation, and many private companies are looking to buy up woodland to offer to investors as part of their ethical and green investment packages. This can potentially be dangerous territory, as some companies, offering small investors a return, are unregulated by the Financial Services Authority (FSA) leaving you with little protection if things go wrong.

The best way to avoid this is to thoroughly research the company offering an investment opportunity with Companies House, and make sure of their regulatory status. Woodland is exempt from income tax and inheritance tax after two years with some complex caveats. Her Majesty’s Revenue and Customs state, “business relief can be claimed on woodland that qualifies as a business asset with no inheritance tax being payable after two years of ownership, Depending on the type of asset, they’ll qualify for relief of either 50 or 100 per cent.”

Private investors can even get a ‘forest fund’ with an outlay of as little as £10,000. Companies providing this service include Forestry Investment Management, Fountains Forestry and Stellar Asset Management.

With instability in the financial sector and the housing market, many find investment in woodland to be sturdier ground.   

If you want to know about this subject or are interested in investing ethically you should seek professional financial advice. Phone your IFA, if you have one, or fill in our online form and we will put you in touch with one of our expert panel of specialist financial advisers.