Once upon a time, British forestry investment was the exclusive preserve of kings and dukes, not for mere mortals. Today, they are sadly not as ubiquitous as they once were. However, the good news for investors is that UK forests represent a tax-free way to allocate money into projects that are also helping to preserve the environment.
TIME Investments has acquired one of the UK’s largest privately owned forests, Barracks Forest in Perthshire, Scotland. The company is a specialist in managing real assets and sustainable investments and this latest acquisition adds to its existing portfolio of forestry investments held within its Inheritance Tax (IHT) service, TIME:Advance. Forestry investments such as Barracks Forest are typically tax-efficient and offer attractive long-term returns to investors.
Barracks Forest offers over 11,000 acres of fast-growing Sitka spruce and pine trees, which provide FSC certified wood and timber for a range of products and markets including paper and cardboard, which are increasingly being used as alternatives to plastic as demand for sustainable materials continues to increase.
A long term asset class
Commercial forests and woodlands are regarded as an increasingly important long-term asset class by UK investors because of their attractive investment characteristics. Forestry typically has a low correlation to other mainstream asset classes, making it an effective diversifier.
Investors in forestry have the opportunity to benefit from inherent organic growth and capital appreciation because of the increasing volume of timber as the crops grow – larger trees can be processed into higher value timber products, and as the value of the underlying land increases. In addition, the introduction of biomass energy installations in the UK and overseas is expected to further increase demand for timber production.
Demand for forestry has more than doubled since 2011, with 14,400 hectares of commercial forestry sold in the UK in 2019 with a market value of just over £121 million*. Analysis of the forestry market shows that the average gross value increased by 17 percent in 2019.
Stephen Daniels, Head of Investments at TIME Investments said:
“Forestry assets are becoming increasingly popular with investors because they provide access to a sustainable investment, but also one that we believe offers low volatility and stable returns. Our research shows that 58% of retail investors said they need to think more about the future of the planet for their children – forestry helps them tick this box.”
TIME has a long track record of managing commercial forests and investors have held forestry investments since 2005 as part of a diversified portfolio in its Corporate IHT service. TIME:Advance also invests in a biomass plant in close to proximity to Barracks Forest, where the timber can be used to generate clean energy, reinforcing its commitment to sustainable investments.
Sustainable and positive impact investments
The addition of Barracks Forest to the TIME:Advance portfolio, which also includes wind, solar and hydro renewable energy, means that three quarters of the portfolio is invested in sustainable and positive impact investments.
Forestry investment also offers investors valuable tax reliefs – no income or capital gains tax on timber sales, plus inheritance tax relief. Investment in UK commercial forestry could have significant tax benefits:
- Inheritance Tax (IHT): 100% IHT relief after two years due to Business Relief, provided the investment is still held on death
- Income Tax: no Income Tax liability on timber revenue
- Capital Gains Tax (CGT): there is no CGT due on any gain made on the value of the timber. The underlying land is subject to CGT.