What Does Managing a Woodland Commercially Mean and in What Sort of Ways Can This Be Done?

Inheritance tax should not be chargeable if a woodland qualifies for 100% Business Relief.

Business Relief may be available where the woodland has been owned for at least 2 years and is actively used in a business. Those in the industry often refer to this as a woodland being ‘commercially managed’. While there is no statutory definition of ‘commercial woodlands’, CONFOR describe these as woodlands which are ‘managed on a commercial basis with a view to the realisation of profits’.

So in practical terms, how does a woodland qualify for Business Relief?

For a woodland to be considered commercial, there are some key criteria to consider. These include:

• Intention to make a profit: there must be a clear intention to manage the woodland commercially, but this does not mean the woodland has to be profitable yet

• Evidence of active management: a woodland management plan or forestry plan is a strong indicator. Legacy Forestry provides bespoke UK Forestry Standard (UKFS) compliant management plans using the Forestry Commission format. In practical terms, active operations can include thinning, planting, harvesting and pest control

• Sale and income: evidence of income from the woodland (e.g. firewood sales) support the commercial nature. Even if income is sporadic, as is common, records of past sales or expect future sales matter

• Involvement of forestry professionals: engaging a local forester or land agent shows serious intent and can contribute to formalising operations

• Grant applications and subsidies: seeking and securing government schemes can indicate commercial intent. For an overview of woodland grants and incentives, please see this page

When assessing how you, or someone helping you, might look to manage your woodland commercially, a great place to start is looking through the woodland management plan that Legacy Forestry provides to buyers. Depending on the woodland, examples of commercial management may include:

• Selling firewood: this could be to firewood merchants, wholesalers, farmers markets, stove suppliers, roadside sales or other individuals

• Growing specific trees: for example, Christmas trees, short rotation coppice providing materials for fencing or biomass for energy production

• Timber income from forestry operations: trees suitable for timber production (e.g. Sitka spruce, Douglas fir, oak) from active operation, which can include selective thinning. It is worth noting that, at present, timber income from commercial forestry is exempt from income or corporation tax

Commercially managing a woodland is not only a way to unlock favourable financial and tax treatment, but it is also a means to ensure its long-term sustainability and proper management of UK woodland.