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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Woodlands: commercial woodlands

TCGA92/S250 (1) & (2)

Where a woodland is managed by the occupier on a commercial basis, any monies received from the sale of the trees from that woodland are exempt from Capital Gains Tax, TCGA92/S250 (1). This exemption applies whether the trees are standing or have been felled.

TCGA92/S250 is restricted to woodland which is managed on a commercial basis and with a view to the realisation of profits. Apportionment of the value between land and trees plus saleable underwood is not applicable to agricultural or amenity woodland.

Woodland may have more than one use, for example it may have both commercial and amenity usage. Where this is the case it will be necessary to apportion the value of the commercial timber away from the amenity value of the woodland.

The exemption also applies to any sums received under an insurance policy in respect of the destruction of, or damage to, the trees, TCGA92/S250 (2). This exemption over-rides the general rule in TCGA92/S22 (1) concerning sums received under insurance policies.

The guidance below covers certain terms and scenarios that you may come across.

Short rotation coppice

`Short rotation coppice’ is the intensive cultivation of trees, planted at high density, with the stems being harvested at intervals of less than 10 years. The cultivation of short rotation coppice is treated as farming for all tax purposes. Any land on which short rotation coppicing is carried on is not `woodland’ for tax purposes.

Growing trees

Where a commercial woodland is sold, the gain arising on that disposal is calculated in the normal way, but that part of the disposal proceeds which relates to the trees growing on the woodland is ignored. Similarly, any expenditure which relates to growing trees is excluded TCGA92/S250 (4) and (5). (Subsections (4) and (5) only apply to commercial woodland covered by TCGA92/S250 (1) and do not apply to agricultural or amenity woodland).

Example:

On 31 December 2002, an individual buys a woodland for £30,000. Of that amount, £20,000 relates to the value of the trees growing on that land.

On 31 March 2013, he disposes of the woodland for £50,000. Of that amount, £32,000 relates to the value of the trees then growing on the land.

Ignoring, for this purpose, the allowable costs of acquisition and disposal, the gain arising is calculated as follows.

      £
       
  Disposal proceeds 50,000  
less Amount relating to growing trees 32,000 18,000
  Cost of land 30,000  
less Amount relating to growing trees 20,000 10,000
  Chargeable Gain   8,000

Where an apportionment of cost or sale proceeds is needed to establish the amount relating to growing trees, advice should be sought from the Valuation Office Agency, see CG74150+.

Felled Trees

TCGA92/S250 (1) and (2) only exempts from Capital Gains Tax sums received in respect of timber from commercial woodlands. Any sums received in respect of felled trees from agricultural or amenity woodlands are within the charge to Capital Gains Tax. However, each tree is treated as a single chattel and a chargeable gain could therefore only arise in the unlikely event of the single tree being sold for more than £6,000. The provisions of TCGA92/S262 (4) regarding ‘sets’, see CG76631+, do not apply to trees.

Right to enter and fell trees

Trees growing on woodland may be disposed of by the owner granting to another person the right to enter the woodland and fell the trees. If the trees are growing on a commercial woodland, the exemption in TCGA92/S250 (1) will apply. If the trees are not growing on a commercial woodland, the CGT consequences depend on the precise nature of the right which is granted.

  • If the person to whom the right is granted is not entitled to benefit from the future growth of the trees, that is if he must fell the trees within a short time, the owner of the woodland is treated as disposing of the trees as individual chattels.
  • If the person to whom the right is granted is entitled to benefit from the future growth of the trees, that is if he is granted the right to fell trees over a long period, then the owner is treated as having made a part-disposal of his land, see CG71800+.

Hedgerow timber and saleable underwood

Disposals of saleable underwood and timber from hedgerows are dealt with in the same way as disposals of trees TCGA92/S250(6).