Commercial Forestry

A sound asset with significant tax advantages

Investing in a commercial timber plantation in the UK can offer the potential for long term capital appreciation with significant tax advantages. Forestry ticks a lot of boxes; here’s why:

  • Real Assets: Investing in land and commercial timber is a proven portfolio diversifier with little or no correlation to other asset classes such as equities or gilts.
  • Rising Prices: UK timber prices have been rising steadily since 2003; over the past 3, 5 and 10 years forestry has outperformed mainstream investments in gilts, equities and commercial property as measured by the Investment Property Databank.
  • Strong Demand: The demand for timber from the UK construction industry continues to increase and this is expected to rise significantly over the next decade as a result of the need for more housing. 82% of UK timber demand was met by imports in 2015.
  • Good Climatic Conditions: The UK has a ‘warm temperate’ climate with relatively high rainfall that provides the best conditions in the World for growing Sitka Spruce – a pine tree highly suitable for use in construction.
  • Generous Tax Breaks: If held for two years, forestry qualifies for Business Property Relief, which means that no inheritance tax applies to the investment on death of the investor. Furthermore there is no income tax on any distribution of income and no capital gains tax on the sale of the timber.

You may ask, how do I invest in forestry?  Well, there are two main ways; either you buy a forest directly and have it professionally managed, or, you consider a forest fund where a specialist manager will buy a number of plantations and investors purchase shares in the fund.  As independent financial advisers, we have experience of both routes into forestry investment.

Investing in a syndicated forestry fund is an attractive way to gain access to this asset class as it offers the following advantages:

  • Economies of scale – pooling resources with many other investors allows the purchase of large scale commercial plantations that maximise the output from the land.
  • Professional management – commercial plantations require professional management; syndicated funds provide this expertise.
  • Lower entry costs – minimum initial investments in syndicated funds are much lower than buying woodland directly.

Unlike smaller, privately owned forests that often have amenity value including sporting rights, wildlife habitats and a variety of tree species that offer the owner the pleasure of personal use, commercial timber plantations are generally large scale and almost single species tree; the fast growing Sitka Spruce. 

The costs of entry to this type of investment can be prohibitive to an investor seeking a more modest outlay, hence these syndicated funds are becoming increasingly more popular and gaining more recognition.

We have gained much experience of forestry as an effective asset class and bring our independent expertise and knowledge to clients seeking sound investment strategies for long-term wealth preservation.

FIM are offering new shares in their highly successful sustainable timber and energy fund CLICK HERE to download the PDF 

Risk Warning: Please note that the following should not be taken as personal investment advice until we have conducted a full and confidential assessment of your financial circumstances. We do not generally advise investing more than 10% of a client’s total wealth in commercial timber due to the nature of the asset and the fact that, like most real assets such as land and property, timber does not offer immediate liquidity.  The following is generic information.

Call us on 01494 683100 and speak to a member of the team on Commercial Forestry

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