Forestry earns big tax reliefs

THERE are valuable tax incentives for commercial forestries or woodlands and it is well worthwhile for farmers to examing these with an accountant or tax advisor to ensure that all reliefs are being availed of and that all the necessary documentation is in place. These tax incentives include:

Income tax exemption on profits arising from forestry operations.

Capital gains tax exemption on the sale of timber.

Partial stamp duty relief on any forestry land. INCOME TAX EXEMPTION Profits arising from woodlands that are managed on a commercial basis are not to be taken into account for any purpose of the tax acts. However, losses incurred in the occupation of woodlands managed on a commercial basis may not be used to shelter a person’s other income from tax. Any profits, gains or losses arising from forestry activities must be included in the taxpayers’ annual return of income, even though the income or gains are exempt from tax. CAPITAL ACQUISITIONS TAX Gifts or inheritances of woodlands within Ireland can qualify for agricultural relief. Agricultural relief is a relief from CAT and takes the form of a flat rate 90 per cent reduction in the market value of all agricultural property that is received as a gift or inheritance, provided that the recipient meets the ‘farmer test’ - meaning that 80 per cent of their assets consist of - after taking the relevant gift or inheritance- of agricultural property. Trees and underwood growing on the land are included in the definition of agricultural property. The trees must be growing, however, so trees that have been harvested or cut down would not qualify for relief. The timing of gifts or inheritances to take account of harvesting of valuable crops or felling of significant tracts of forestry should therefore be considered. STAMP DUTY ON FORESTRY There is partial relief from stamp duty in respect of certain instruments relating to the sale or lease of land on which trees are growing. The partial relief is given by providing that the value of any trees growing on the land at the time the land is sold or leased will not be taken into account if: the trees are being managed on a commercial basis with a view to making a profit; the trees are growing on a substantial part of the land; and the instrument contains a certificate to such effect.

■ Forestry growers can avail of valuable tax incentives.