Inheritance tax manual - Section 10 : Part 2 : "Woodlands Relief" Not Applicable

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Section 10 - Part 2 : "Woodlands Relief" Not Applicable

Necessity for woodlands valuation to include trees and underwood

10.50 Agricultural woodlands

Any transfers of value (whether lifetime or on death) of woodlands which are agricultural property as defined in s.115(2) IHTA 1984 (ie. occupied with and ancillary to the occupation of agricultural land or pasture) will always include the value of the timber (ie. trees or underwood).

10.51 Non-agricultural woodlands

Lifetime transfers of non-agricultural woodlands will always include the value of the timber, as will be the case in transfers on death, if an effective election for woodlands relief has not been made; but see Part 1 para 10.26 if it is considered that a claim for relief might be substantiated.

10.52 Growing plantations and underwood

The value of immature plantations should reflect the prospect of trees growing to maturity and becoming saleable as timber, either standing or felled. Regard should be had to the value of any underwood.

Valuation considerations

10.53 Dedication covenants and other agreements with the Forestry Commission

If the woodlands are the subject of a dedication covenant under the Forestry Act 1967, or any other agreement with the Forestry Commission, the deed or agreement should be inspected particularly with regard to the plan of operations showing the future programme for planting, thinning and clear felling. The deed or agreement will also disclose what financial assistance is provided by the Forestry Commission in respect of replanting and maintenance.

The market value of such woodlands will usually be the figure a purchaser would give in order to own and manage the woodlands for the main purpose of timber production on a long term plan under skilled supervision.

10.54 Tree Preservation Orders

If the woodlands are not dedicated nor the subject of any other agreement with the Forestry Commission, the DV should check the office records as to whether any of them are the subject of Tree Preservation Orders under s.60 T & CPA 1971. Such Orders can only be made where it is expedient in the interest of amenity and, exceptionally, in certain circumstances for woodlands which are the subject of dedication covenants or contributions by the Forestry Commission towards the cost of upkeep. (See s.60(7) T & CPA 1971).

If there is such an Order, purchase by a timber merchant will normally be ruled out although selective felling might be permitted.

Tree Preservation Orders may provide for the payment of compensation in respect of loss or damage in consequence of the refusal of the permission to fell but it is necessary to inspect the particular Order to ascertain the rights to compensation.

10.55 Licences to fell

S.9 Forestry Act 1967 prohibits the felling of any growing trees (apart from certain exceptions such as trees with a diameter not exceding three inches, coppice or underwood not exceeding six inches, thinnings not exceeding four inches, all measured 5 feet from the ground; garden and orchard trees, and a licence-free allowance of 825 cubic feet per quarter for use on the owner's own property, but of which he may sell up to 150 cubic feet) unless a felling licence has been granted by the Forestry Commission. See Forestry (Exemptions from restriction of felling) Regulations 1951 and 1959. A licence may be subject to a replanting condition. (With regard to the Greater London area, by s.36 these provisions only apply to the Outer London Boroughs while control in the inner area may be effected by Tree Preservation Orders, where appropriate, under the T & CPA 1971).

In all appropriate cases the parties should be asked whether licences to fell have been applied for and if so with what result.

If no application has been made there is no objection in important cases to the DV informally approaching the Regional Conservator of the Forestry Commission in order to enquire what would have been the chances of a felling licence being granted for particular woodlands if application had been made at the valuation date.

In issuing licences the Forestry Commission have regard not only to the total volume, but also to age, type and condition of the timber. Generally if timber is mature, saleable and will be replanted, a licence will be issued, provided there are no overriding amenity considerations.

If a felling licence is likely to be refused it is possible that a timber merchant would not be interested and that the most likely purchaser would be a person who would invest in the timber having regard to its incremental growth with the knowledge that under s.11 Forestry Act 1967 compensation is payable if, as a result of a refusal of a licence, there is depreciation in the value of the trees which is attributable to deterioration in the quality of the timber. Reference should be made to s.11 of the Act and the Forestry (Felling of Trees) Regulations 1951 (Statutory Instrument 1951 No 1726) Reg 5, for further information in connection with claims.

10.56 Income Tax and timber used for estate repairs

The market value of woodlands may be influenced by the relatively favourable taxation of income arising therefrom and by the fact that IHT is not charged on timber felled and used for estate repairs.

10.57 State aid

Financial assistance is sometimes provided by the Forestry Commission to encourage woodland owners to restore their woods to full production.

These grants may be revised from time to time. Details of the grants payable at any relevant date may be obtained from publications of the Forestry Commission or from the local Conservator of Forests.

10.58-59 Reserved

Other types of relief

10.60 General

In addition to woodlands relief for non-agricultural woodlands qualifying under ss.125-130 IHTA 1984 (see Part 1) other types of relief, as set out in the following sub-paras, may be available for woodlands generally.

10.61 Agricultural relief

Agricultural relief is available if the woodlands are occupied with, and ancillary to, the occupation of agricultural land or pasture (s.115(2) IHTA 1984) (see Section 9). If woodlands are granted agricultural relief and business relief is also granted, the business relief will be restricted to any value in excess of the agricultural value.

10.62 Business relief

Business relief is available if the woodlands are run as a commercial business and the normal conditions for business relief are satisfied (see Section 11).

If woodlands relief is also granted, business relief will apply to the value of the land itself on which the trees and underwood are growing and to the remaining assets of the business.

10.63-64 Reserved


10.65 Prior agreements

No prior agreements should be entered into in respect of lifetime transfers. For deemed transfers on death a prior agreement may be entered into subject to the usual conditions (see Section 31) provided that, if non-agricultural woodlands are involved, the parties confirm in writing that an election for woodlands relief will not be made.

10.66 Case registration

Cases received from CTO should be registered in accordance with the normal procedure for IHT life or death cases.

10.67-99 Reserved

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