FCo Rural Estates Newsletter Spring 2022 - Flipbook - Page 14
5 – Woodland – conditional exemption
and environmental schemes
Isabel Paintin
Woodland is proving to be an increasingly attractive asset as shown
by the increase in the value of commercial woodland in 2021. As
woodland plays an increasingly important part in diversified estates
and with various schemes encouraging new woodland to be planted,
we look at the interaction between two major benefits available
to woodland owners – conditional exemption and subsidies from
environmental schemes.
Conditional exemption
As outlined in David Gubbay’s The tax appeal of trees, there are several tax advantages
from which UK woodland can benefit, including business property relief, agricultural
property relief, rollover or holdover relief. Heritage relief (also known as conditional
exemption) may be available if the woodland itself or the surrounding area is one of
outstanding scenic, historic or scientific interest.
Marcus Maxwell
If woodland qualifies for this relief, then on a chargeable transfer for inheritance tax
(IHT) (such as the death of the owner or a 10 year charge where the woodland is held in
a relevant property trust) it may be exempted from IHT on the condition that the owner
enters into undertakings with HMRC to maintain the woodland and grant public access.
HMRC will impose a recapture charge if undertakings are breached or the woodland is
sold. Claims for heritage relief can apply to both ancient woodland and new plantations.
In addition, it is possible for woodland to be designated for conditional exemption before
an IHT charge arises in return for undertakings being given. The owner is then secure in
the knowledge that conditional exemption will be available for future IHT charges and
the designation permits the owner to set up a heritage maintenance fund to support the
woodland and any other designated land.
Subsidies
Post Brexit, legislation such as the Agriculture Act 2020 is creating a public policy
framework that replaces the direct subsidies of the Common Agricultural Policy with
subsidy schemes that reward the provision of environmental goods. Environmental Land
Management schemes (ELMs) are soon to be piloted and aim to achieve the goals of
the government’s 25 Year Environmental Plan and commitment to net zero emissions by
2050. Some ELMs (such as Landscape Recovery Schemes) anticipate large-scale tree
planting. A variety of other schemes involving woodland creation also (in different ways)
offer money in return for woodland commitments.
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The Woodland Carbon Code sets out strict contractual requirements for carbon capture
through woodland creation and the generation of woodland carbon units for sale.
•
Countryside Stewardship Woodland Tree Health grants provide a capital payment
to assist with the removal of diseased trees and restocking. Pilots for the new, full
Tree Health scheme will run for the next few years to test new grants which will be
available to a wider group (such as small woodland managers).
•
Woodland Creation Planning Grants and Woodland Creation Offers can provide a
capital contribution and 10 years of standard maintenance costs to help establish
new woodlands.
Rural Estates Newsletter
Spring 2022