Investing in UK commercial forestry can offer stable and predictable returns, backed by freehold or long leasehold interests. Commercial forestry is uncorrelated to other asset classes and has low volatility, as well as offering a good opportunity to generate capital growth and woodland tax relief.
An investment into commercial forestry not only qualifies for Business Relief after two years, but all timber sales are also free from income tax and capital gains tax – making it a proven tax-efficient asset class for both private investors and business owners. Investors will also gain access to a sector which typically requires a more significant capital outlay.
The long-term annual return from commercial forestry has been almost 10% per annum over the last 25 years, illustrating the steady returns of this asset class – and significantly, there has been no negative growth during this period. Investors should be aware however that the return from commercial forestry is not linear and will reflect the crop age and composition, but we will arrange for an independent biannual valuation of each forest.
All of our commercial forests are located in the UK, with the majority in Scotland and a small number in Wales. The predominant crop species is Sitka spruce, which is the most commonly planted conifer in the UK, and we typically acquire woodlands which are approximately halfway through their 35 to 40 year life cycle on average.
The forestry investment return comes primarily from the physical tree growth – and if a Sitka spruce takes 40 years to grow before harvesting, then broadly the growth is equivalent to 2.5% per annum. This growth is supplemented by inflation on the price of harvested timber, and land price inflation due to the increasing size of the trees growing upon it.
We target woodlands which are capable of outperforming the MSCI UK Forestry Index over a period of around ten years – and this showed an annualised return of 9.2% to 31st December 2017, calculated from launch in 1992.
A commercial forestry partnership acquires the freehold, or long leasehold, interest in each plantation – with full title at the Land Registry. It then enters into a contract for services with our specialist manager, and the management team are employed directly by the partnership.
Any specialist work such as harvesting and replanting obligations are put out to tender as and when required.
Example Investment: Panmure Forest, close to Carnoustie, Scotland. Acquired September 2019.Download our Investment Sector overview
Meet Our Investment Manager
Anthony’s career in the UK Forestry Industry began in the 1970s – almost since new privately-owned upland forestry began, with the stimulus of income tax incentives in the 1960s. As Marketing Director of Economic Forestry Limited during the 1980s, he was responsible for stimulating interest in tree planting among successful entrepreneurs, until tax rules were changed in the 1988 budget.
Forestry Investment Consultancy Ltd. was created to provide investment advice in respect of Reinvestment Relief from Capital Gains Tax – until this was abolished in the 1998 Finance Act to promote inheritance tax advice applications, which have grown to be a major stimulus to investment in UK woodlands.
During the first decade of the new century, Anthony diversified into other investment areas with Close Brothers, a listed investment bank. After returning to his Dorset home, he concentrated upon providing a personal investment service to those wanting to invest in UK forests, for long term tax planning.
Today, Forestry Investment Consultancy Ltd. manages 18,830 acres of UK forestry in 37 forestry estates – working closely with the forestry owners to handle all administration, management decisions, harvesting and planting operations.
Commercial Forestry is accessible through the following services:
Stellar Business IHT Service
A discretionary managed service which provides numerous succession planning and tax efficiency options for business owners – either following the sale of a company, or to invest excess company capital to maintain tax efficiency.
Stellar Growth IHT Service
This discretionary managed service involves the creation of a privately owned limited company for each investor, to access a portfolio of asset-backed Investment Sectors – targeting 5% growth per annum.