An Agriculture Bill was included in the recent Queen’s speech as a core part of the Government’s mammoth task of legislating for Brexit.
The plan is that the bill will create a new system of support for farmers to replace the Basic Payments claimed under Common Agricultural Policy. Of course it is early days and we won’t know the details of how the new scheme is intended to operate for some time.
While the suggestion that some form of support will be put in place, at least in the short term, is welcome, many commentators are of the view that the value of direct subsidy support will be reducing in the future. Taken with the current Westminster tend for pulling away support for renewable energy technology, farmers and landowners will be looking at other opportunities for diversification of their enterprises.
One such option remains new planting of woodlands. Planting levels are still low in historical terms and the Scottish Government has pledged to increase Scotland’s woodland cover significantly over the next few decades. It intends to increase its annual planting target from 10,000 hectares to 15,000 hectares by 2025.
There are number of advantages for forestry that make it an investment worth looking at. There are still good grants available for establishing and managing forestry under the Scottish Rural Development Programme. It seems likely that type of support will continue. The political will to encourage environmental benefits in land management is clear.
There are also currently significant tax advantages available, particularly for those looking to invest in the mid to long term, and where the forestry is managed on a commercial basis. For example, income derived from the sale of timber from a commercial woodland is not subject to income tax in the UK. Capital gains tax is payable on the sale of the land that the trees are growing on, but not on the value of the timber itself (whether standing or felled). Forestry land is also potentially eligible for helpful “holdover” and “rollover” reliefs for capital gains tax. From an inheritance tax point of view, commercial forestry may also qualify for Business Property Relief, subject to certain criteria.
A fairly recent development is the ability to top up income from woodland creation by selling carbon units under the Woodland Carbon Code. This scheme is designed to allow business to mitigate the impact of their greenhouse gas emissions by helping to fund tree planting. To qualify, the landowner must commit to certain conditions, such as retaining the woodland for an agreed minimum period and adopting an agreed silvicultural system.
Investing in forestry is a long game and it will not be for everyone, but it is certainly worth a look.
From a legal point of view, access is crucial for forestry. If you don’t own the road that you would use for timber extraction, it is vital that you check the extent of the access rights in your title deeds before committing major expenditure. Forestry extraction is one of the most intensive uses in terms of access and if there is any limit or restriction on your rights of access, it could pose a serious issue.
As ever with the law, things are not straightforward. Even if your title has a general grant of access without any express qualification or restriction, it is still possible to get caught out. There are legal rules in Scotland that imply certain conditions on a servitude right of access. One of those is that the use of the access road will not be increased beyond the extent that is necessary to use it for its original purpose. This is not always clear cut and you might need to look at other evidence to identify what the original granter of the access right had in mind at the time.