Tax free income growing on trees

GOVERNMENT supports for forestry are very favourable as forestry creates employment in rural areas. It will produce revenue for oneself, your children and beyond. As well as financial and economic reasons to consider forestry there are other benefits such as carbon sequestration, improving biodiversity and air quality.

The site must be capable of producing a commercial crop of timber, and my company undertakes the proper assessment of site, soil and species suitability to establish plantations to Forest Service standard. Plantations must be fully fenced from time of planting, and ground cultivation is usually carried out by mechanical mounding. We always use grade 1 plants (Washington provenance seed source) as they give faster growth rates, and superior quality timber.

Grant aid is available to complete all work and there is no cost to the owner. The grant is divided into two sections, the establishment phase which is 75% of the total grant, and the final 25% is paid at year 4 when the crop is deemed as being free growing following a Forest Service inspection.

A hugely attractive tax free premium is paid from year 1 to 15 to both farmers and non farmers. In the normal diverse sites, which occur in Counties Limerick, Kerry and Clare, the rate of premium is €204 per acre. The Single Farm Payment is still paid on the planted land.

A management plan has to be prepared at year 10 outlining the up to date plantation details, and the proposed management decisions and operations to be undertaken up to year 20. A contribution of €300 is paid to the forest owner towards the cost of having a registered forester carry out the plan.

In order to facilitate this, and further assessments of the crop in relation to felling licenses, road applications, and preparation for first thinning, it is vital that inspection paths are in place at this stage.

A road grant at a rate of 25 meters to the hectare at €40 per metre is available when the crop is deemed to be within two years of thinning.

We are actively purchasing semi-mature and mature plantations. There is significant investor interest in acquiring forests and windblown areas. If you have a good quality forest, windblown area, or bare ground then contact us.

Thinning will increase overall timber revenue by increasing the volume of sawlog produced. It produces an interim revenue source for the forest owner, and will also improve the quality of the final crop.

Timber prices are at an all time high at the moment. Every forest is different and factors such as timber quality, current timber prices, ground conditions, extraction distances, and road access, impact on the financial return.

The percentage pulp has a huge bearing on the price. It is absolutely essential that proper silvicultural thinning is undertaken, by ensuring that only experienced harvesting operators are employed.

Plan well ahead of first thinning. Secure a felling licence and construct a harvest road at least six to twelve months in advance. This allows the road itself to settle. I have seen forests ravaged at first thinning stage. This prolongs the clearfell age, and can have an adverse effect on timber quality.

I own and manage my own plantations. I would only recommend to my clients those purchasers to whom I would offer my own timber. With these I am assured of proper silvicultural thinning and prompt payment.

It is imperative that a proper timber sales agreement be in place prior to the commencement of harvesting. Theft of timber is becoming a huge problem, and security measures should be in place to prevent this.

In relation to taxation income from plantations managed on a commercial basis is exempt from Income Taxes.

Capital Gains Tax is only paid on the underlying land and the growing timber is exempt. The current rate of CGT is 33% and is not applicable to a disposal on death. VAT is not charged on Commercial Forestry as it as regarded as agricultural production. PRSI and USC is charged on income including premiums from woodlands.

In my experience most people are attracted by the tax free premia only. I suggest that another factor that must be taken into account is that this crop is creating a pension fund for the owner or his family. You tell me any other agricultural enterprise that has no initial cost, and is making that kind of guaranteed money (€204 per acre yearly tax free), with no work or expense involved.

For further information contact Michael Sweeney

Mobile: O87-2221661. Email: selectforest@gmail. com