Woodlands Relief

Because growing trees may take several generations to mature and would otherwise be taxed on each successive death, there is a specific relief for transfers of woodlands on death, under IHTA84/S125. It is available, subject to certain conditions being satisfied, where any part of the value of a person’s estate immediately before death is attributable to the value of land on which trees or underwood is growing.

There are three types of woodland for inheritance tax purposes and they are as follows:

* Commercial Woodland

This includes woodlands such as orchards, nurseries or other areas of wood or forest used to generate business profits. This sort of land is usually eligible for 100% BPR (subject to conditions). Woodlands relief can be claimed but where BPR is allowed in full then this will be unnecessary.

* Woodland ancillary to agriculture

This type of woodland is eligible for APR. Some examples include shelter belts which are a line of trees or shrubs planted to protect a field of crops from bad weather. If this kind of land is designated by HMRC as agricultural property then the woodland is excluded from woodlands relief.

* Other non-commercial or non-agricultural woodland.

This is areas such as woodland held as part of one’s private residence or held as an investment. This type of woodland will qualify for woodlands relief.

Where the relief is available, the person liable for the tax may elect to exclude the value of the trees or underwood from the value transferred by the chargeable transfer on the deceased’s death and instead pay tax when the trees are disposed of, for example, by sale or gift, other than to the disposer’s spouse or civil partner. No relief is given for the land itself.

If there is a disposal, tax is charged on the next death in the usual way, unless another election is made to defer the tax.

Conditions for Relief

An election must be made by the Executors of the deceased within 2 years of the date of death and the land must be situated in the UK or in an EEA state.

The deceased must have either:

1. Owned the land for 5 years immediately prior to their death, or
2. Acquired the land by way of gift or inheritance.

Subsequent Disposal

A subsequent disposal of the woodlands will trigger a charge to IHT.

This means that the sale of the woodland would be charged to IHT on the vendor and on a gift of the woodland the IHT is charged on the donor. There is of course and exception for a gift to a spouse or civil partner.

For further information, the official government website is always a good first port of call! However, speaking to a seasoned professional is also a good option. We can help you there! As expert accountants specialising in Agriculture and Horticultural Accounting, we are always more than happy to see how we can help!

So, please do call us today at one of our three office. And, together, let’s see how we can partner in your Woodlands Relief success!

☎️ Midhurst: 01730 817 243 | ☎️ Chichester: 01243 782 423 | ☎️ Whiteley: 01489 287 782