SDLT on mixed use woodland

[Piers]

Hi All. Hoping someone can help me here. It's not strictly a self-build tax question but it concerns my plot of land so here goes:

 

Last year we bought a house with about 13 acres of woodland attached to the plot. We paid SDLT at residential rates (or rather my solicitor did). I've just learned that because we have the woodland and plan to cut and sell some of the pine one day (ie small-scale commercial forestry) we should have paid mixed-use SDLT which is a fair bit lower.

 

I have spoken to HMRC Birmingham who have asked us to send in various documents, letters explaining our recalculations and evidence of our claim.

 

The thing is, I can't think how one proves that our woodland is commercial forestry until we cut and sell wood - which hasn't happened yet. Any ideas?

[newhome]

https://www.telegraph.co.uk/personal-banking/mortgages/buyers-upmarket-homes-using-forestry-loophole-attempt-dodge/amp/

 

Ugh, I reckon that it’s harder to get money back from HMRC than to not pay it in the first place. Strange that your solicitor wouldn’t have known this TBH. I reckon that this could be a scenario where it’s worth engaging a specialist tax consultant if a decent sum is involved. Just off the top of my head it may be worth preparing a business plan demonstrating the intention. Maybe the first part of that business plan might detail near term plans to prepare the woodland for timber production, so clearance / tidying up of the area and maybe a planting scheme for young trees. I believe that @jamieled may have a plan relating to the woodland he bought. In Scotland, but he may have some better ideas. 

 

 

 

 

[Mr Punter]

You need specialist tax advice here, not the opinion of us lot!  It is quite an intriguing loophole though, especially for high value purchases.  Oddly there is nothing to say your woodland needs to be anywhere near the house.

[Mr Punter]

3 minutes ago, newhome said:

I reckon that it’s harder to get money back from HMRC than to not pay it in the first place

 

A while back we were contacted by a firm who offered to get us Capital Allowance tax relief because we owned some commercial property. They sent someone round who did a survey of the building - a fairly poor 1950s office -and they calculated the value of pipes, wires, air con etc. and lodged a claim with HMRC.

 

We only bought the building with a view to demolish but were able to claim tens of thousands in relief for works carried out by previous owners.

[Temp]

I agree you need proper advice...

 

If the woods are counted as part of the curtilage of your house that might increase SDLT but I guess it might also make it easier to build on from a planning perspective.  You could try asking the Planning Department if they consider the woods to be within the curtilage of the house and using that to challenge the  SDLT paid to the HMRC.

 

I think you also need to check out the rules on  Capital Gains tax. The exemption on your Principle Private Residence has a gotcha that catches you if it's over 1.2 acres.

 

https://www.gov.uk/tax-sell-home

 

You don’t pay Capital Gains Tax when you sell (or ‘dispose of’) your home if all of the following apply:

• you have one home and you’ve lived in it as your main home for all the time you’ve owned it
• you haven’t let part of it out - this doesn’t include having a single lodger
• you haven’t used part of it for business only
• the grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total
• you didn’t buy it just to make a gain

[Temp]

51 minutes ago, Piers said:

The thing is, I can't think how one proves that our woodland is commercial forestry 

 

Are the trees self seeded or were they planted in rows?

[CC45]

will the HMRC be on the look out for the income in the future?

[jamieled]

Bit different to us in that we were essentially buying woodland which had planning attached, so it fell under the 'non residential' property of the LBTT scheme in Scotland. There was no requirement for us to develop a plan prior to the sale but then I suppose it was fairly obvious it was a commercial woodland in some sense.

 

I can think of various ways of showing you have some intent to manage it commercially, but I have no idea whether HMRC would consider these. We have a woodland management plan partly for our own means, and partly because I believe it's easier for grant applications and felling licenses. Interestingly an acquaintance in the SW has just won a long running planning battle partly related to what constitutes commercial forestry. In the UK there's a bit of a bias towards large scale conifer rotations, but clearly that's just one way of doing it.

 

You can get the forestry commissions to approve a woodland management plan, and perhaps this would look fairly official in terms of how HMRC view it. We did this ourselves with no prior experience, but it did take a bit of effort.