HMRC internal manual

Inheritance Tax Manual

IHTM04371 - Woodlands: introduction

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 (IHTM04029) immediately before death is attributable to the value of land on which trees or underwood are growing. This provision applies only if the land is in the United Kingdom or another state within the European Economic Area (IHTM04377) at the date of death

Where the relief is available, the person liable for the tax may elect to exclude the value of the trees or underwood (but not the land itself) from the value transferred by the chargeable transfer on the deceased’s death and instead pay tax when the trees are disposed of (IHTM04121), for example, by sale or gift, other than to the disposer’s spouse or civil partner (IHTM11032).

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.