HMRC has recently revised and expanded its tax guidance pertaining to woodland owners. Depending on the nature and utilisation of woodlands, owners may be eligible for specific tax reliefs or exemptions from certain taxes.

The revised online guidance now incorporates new sections that elaborate on the tax treatment of various types of woodlands, such as commercial woodlands, amenity woodlands, and ancient woodlands.

In terms of Inheritance Tax (IHT) reliefs, specific types of woodlands can qualify. For example, commercial woodlands, where timber is cultivated for future felling, may be eligible for woodlands relief. To accommodate the extended time required for trees to mature, this relief is designed to prevent an IHT charge upon successive deaths. Woodlands relief applies to the value of the trees or underwood, excluding the land they grow on. It permits the deferral of IHT until the trees are disposed of, such as through sale or gift.

Alternatively, woodlands utilised as part of a business or ancillary to agricultural activities may attract Business Property Relief or Agricultural Property Relief (APR).

Ancient woodlands, deemed sites of special historic, scenic, or scientific significance, may qualify for the conditional exemption tax incentive scheme. This scheme exempts them from Capital Gains Tax and IHT if specific conditions are met.

Starting from April 6, 2024, woodlands relief and APR will only be available for properties located in the UK.

Different types of woodlands may also be subject to special treatment concerning income tax and corporation tax. The type of woodland can impact an owner’s eligibility for the basic payment scheme.

Land used to generate carbon or other ecosystem service units may fall outside the scope of income tax and corporation tax. Given the evolving nature of tax rules in this area, both HMRC and additional guidance are currently limited. The updated guidance underscores the existing information, but you may find it beneficial to seek our advice directly due to the intricate nature of these considerations.