Tax free investment in woodland * avoiding IHT * income and corporation tax * mitigating inheritance tax by investing in forestry and other tax efficient advantages

Although timber prices have risen strongly from their low point in 2004, they are still 50% below their last peak in 1995. This demonstrates good potential for further increases.

Start of article about tax free investments.

Climate and soil plus good management combine to make Forestry a business in which the UK has a competitive advantage. In the UK trees grow up to five times faster than in traditional timber supplying countries such as Scandinavia, Canada and the old Soviet block countries. This is because the UK has excellent conditions for growing and processing timber.

A key factor is that UK is a heavy net importer of timber. The recent rise in fuel prices has pushed up the UK landed cost of imported timber, adding further strength to the competitiveness of UK produced timber to service UK demand.

Cost of entry

You will probably need to invest at least £100,000 to own your own forest and make the best returns. Don't worry, there are a number of well established funds which will invest your money carefully in forestry assets for you.

By investing as little as £25,000 in one of these funds you will obtain all the benefits of ownership together with the economies of scale and diversification which larger private investors enjoy from directly owning their own forest(s).

You also have the peace of mind that in return for a small annual charge (generally under 1% pa.) you will have expert independent management to deal with the problems of investment selection, adequate insurance, supervision of day to day forestry management, timing of the marketing of timber for best result for you, and all aspects of financial reporting and control.

So the commercial case is strong - now for the icing on the cake - the many tax benefits which accrue from an investment in a UK Forestry Fund.

I should state that this gives a summary of the current tax rules. Whilst tax legislation changes can never be ruled out, there probably is less likelihood of changes being made that will be detrimental to investors in woodlands, with their environmental and social credentials, than to many other types of investment.

Avoiding inheritance tax by investing in woodland