RICS Rural launched its Woodland Taxation and Valuation Briefing Paper at the RICS South East Rural Update, Paddock Wood in Kent on 24 February. A link and introduction to the full briefing paper can be seen here: http://www.rics.org/uk/knowledge/news-insight/news/woodland-taxation-and-valuation--a-professional-briefing-paper-for-surveyors-1st-edition-february-2014-/ David Lewis and I used these slides to cover the key points in the papers, including some worked examples.

1. Woodland Taxation
and Valuation Briefng
Charles Cowap
David Lewis
RICS South East Rural Update
2014

2. Inheritance tax

3. Is Woodland:
1. A Business Asset?
2. Agricultural Property?
3. None of the above?

4. Woodland as a Business
Asset
• Business Property Relief
– Not investment business
(Balfour)
• How to demonstrate
Business Nature?

5. Woodland as agricultural
property
• Agricultural Property
Relief
– Nature of ‘agricultural
property’
– ‘with’ and ‘ancillary’
• ‘Agricultural Value’

6. None of the Above
• Woodlands Relief
– Prairie Value – the custom
and practice
– What the IHTA 1984 (s125)
says

7. An example
10 acre woodland,
broadleaf, Home
Counties, vacant
possession
Various scenarios

8. Values
•
•
•
•
Freehold market value £70,000
Agricultural value £40,000
Prairie value £15,000
Value of trees and underwood £20,000

9. BPR
• Claim at 100% of MV
• Nil IHT

10. APR
• Claim at 100% of Agricultural Value
(£40,000)
• BPR on balance (£30,000)
• Nil IHT
• BPR not available? IHT on £30,000, ie
£12,000

11. Woodlands Relief (1)
• Value to Prairie Value
• IHT due on £15,000 @ 40% = £6,000
• Further IHT on subsequent sale of
timber (if ever)

12. Woodlands Relief (2)
Literal interpretation
• Market Value – Timber and underwood
value
• £70,000 - £20,000 = £50,000
• IHT on £50,000 @ 40% = £20,000

13. No claim for relief
• Market Value at 40% IHT
• £28,000

14. One wood
Five different IHT scenarios
•
•
•
•
•
No relief: £28,000
Literal Woodland Relief: £20,000
Prairie Value Woodland Relief: £6,000
APR but no BPR: £12,000
Full BPR and/or APR: Nil

15. The striking impact of Amenity
Value
Timber and Underwood
The rest: Amenity Value?
Prairie Value
Where does
this go?

16. Capital gains tax

17. Commercial Woodland and
CGT
•
•
•
•
•
TCGA 1992, s250
Managed
Occupier
Commercial Basis
View to realisation of profits
 Value of trees is excluded

18. How?
• TCGA  silent
• VOA Manual  ‘just and reasonable
basis’

19. Our example wood again
•
•
•
•
Just sold for £70,000
Acquired for £30,000
Value of standing timber £20,000
Prairie value £15,000

20. One approach
• Deduct timber value from MV
– £70,000 - £20,000 = £50,000
– Apply same ratio to base cost = £21,500
– Gain therefore £28,500
– CGT at 28% £7,980

21. Another approach
• Divide the synergistic amenity value
– Prairie value:standing timber: 15:20
– Applied to £70,000 - £40,000 is timber
value; therefore £30,000 for land
– Base cost on same basis: £12,900
– Chargeable Gain therefore £17,100
– CGT at 28%: £4,788

22. Non commercial
• CGT on full gain
• £70,000 - £30,000 = £40,000
• £40,000 gain at 28% CGT = £11,200

23. So 3 potential CGT bills
• £7,980
• £4,788
• £11,200

24. The moral of this story
MAKE IT AND
KEEP IT
COMMERCIAL
AND be
able to
prove it!

25. We are:
Charles Cowap
David Lewis
cdcowap@gmail.com
07947 706505
david.lewis@rau.ac.uk
01285 652531
www.harper-adams.ac.uk
@charlescowap
www.charlescowap.word
press.com
www.rau.ac.uk