7 key steps to take before you sell timber — from contracts to tax

Make sure you have a valid felling licence and start the approval process two to three years in advance ‘Transparency in all stages of this process is very important. Ensure the terms of such a package are covered under an appropriate contract’

There are a number of key considerations for anyone selling timber this year. Firstly, selling timber requires to have in place a valid felling licence and appropriate road access.

As the loading of timber is illegal on public roads, even small forests will require road construction to provide timber loading areas. Construction should be completed one to two years in advance so the road can settle before harvesting operations commence.

In most cases, the DAFM acts as the single consent authority for applications for forest road works licences. Attractive roading grants are currently available from the Forest Service, DAFM.

A felling licence is required to harvest trees. Felling licences can be valid for up to 10 years in duration, which may be extended for up to five years.

Make sure that you start this process well in advance as these approvals need to be in place before timber harvesting takes place: allow two to three years to do so.

Know what you’re selling

When you bring cattle to the mart, you’ll have a pretty good idea about the weight and grade of the animals you hope to sell.

Selling timber is similar: you don’t know if a timber buyer is giving you a fair price if you don’t know the quantity and quality of timber you’re hoping to sell. You are flying blind without this knowledge.

A forestry consultant with harvesting expertise can do a pre-sales measurement for you. And yes, it may cost money, but you’ll find that it is money very well spent.

Sale types

Timber is sold in Ireland either standing, roadside or delivered-in to the mill.

Standing sale: You agree a price per tonne with the timber buyer in advance of harvesting. You can agree an average price across the board or per product category. The buyer is responsible for harvesting and haulage.

Roadside sale: You organise the harvesting of the timber and place it roadside. The timber is then sold to the buyer(s). The haulage is covered by the buyer.

Delivered-in sale: You organise the harvesting and haulage, delivering the timber to the mill. The buyer pays for the timber delivered to their yard/mill.

Contracts

Never consider selling your timber without a decent written contract in place. It outlines the agreed prices, payment terms, harvest timelines as well as commencement and finish dates.

It will also protect all parties outlining legal, environmental and health and safety responsibilities.

Some forestry companies may offer you a package where they undertake to harvest, transport and sell your timber. Management costs are charged as a percentage of the net timber value.

Transparency in all stages of this process is very important. Ensure the terms of such a package are covered under an appropriate contract.

As the owner, you have responsibilities too. It is your responsibility to make sure that the conditions of the felling licence and the Health & Safety at Work Act are adhered to.

Supervision

Your supervision is key to a timber sale running smoothly. It is important that you, as the owner, take an active interest in the timber harvesting and sales process.

The more familiar you are with the process, the easier you’ll find to recognise if things are running smoothly or issues need to be sorted out.

It is much easier and cheaper to prevent things going wrong rather than trying to fix things afterwards.

When harvesting operations begin, it is essential that you or your agent carefully monitor progress and ensure all procedures that were pre-agreed are being followed.

This involves supervising thinning and clearfell operations, keeping track of timber harvested and getting paid for your timber.

While the clearfell harvest is relatively straightforward, thinning requires careful management to ensure the future development of your forest as over-thinning may give some short-term financial gain, but it can result in serious longterm devaluation of the crop.

However, under-thinning does not sufficiently allow your forest to develop to its full potential.

Thinning control protects your forest in the long term by ensuring that thinning is carried out to the recommended prescription and that the correct intensity, volume and type of trees are removed.

Health and safety

You as the owner, the timber buyer and the contractor have legal duties to ensure that people’s safety and health is not put at risk during, or as a result of, forestry operations.

This means that a number of duties need to be fulfilled. For instance, for each site a Hazard Identification and Risk Assessment (HIRA) must be prepared.

Such a document highlights potential hazards, what to do when things go wrong and who to contact.

Taxation

Although timber is exempt from income tax, you may be liable for PRSI, USC and VAT.

For instance, the flat rate refund for farmers who are not registered for VAT is currently 4.8pc. Make sure that you clarify in advance if your timber sale will be inclusive or exclusive of VAT. The difference is €4,800 on a €100,000 timber sale.

Find out more

Further details on any of the above topics are available from the Teagasc Forestry website.

For instance, the 28-page A4 booklet ‘Harvesting and Selling Timber from Conifer Forests — A Step-by-Step Guide for Forest Owners’, the ‘Timber Harvesting and Sales Checklist’ leaflet and the ‘Forestry — Health & Safety’ leaflet provide invaluable information helping you to make an informed decision.