How to ensure your investment grows: buy some woodland

For some of us, investing in an environmental fund is not enough. For a more hands-on experience, an increasing number of people have decided to buy a woodland of their own. This is not as outlandish as it may seem, with prices starting from £15,000 for a six-acre stretch. There is the added attraction that, provided certain conditions are met, the woodland can be passed down to relatives without being liable for inheritance tax. But the investment "return" is rarely measured in money.

For some of us, investing in an environmental fund is not enough. For a more hands-on experience, an increasing number of people have decided to buy a woodland of their own. This is not as outlandish as it may seem, with prices starting from £15,000 for a six-acre stretch. There is the added attraction that, provided certain conditions are met, the woodland can be passed down to relatives without being liable for inheritance tax. But the investment "return" is rarely measured in money.

A former British Airways Jumbo jet pilot, Stewart Caine, and his wife, Yvonne, both in their 60s, found chance intervened to reveal their shared interest in woodland while on a day trip two years ago to Sandwich in Kent from their home in East Grinstead, West Sussex.

Mr Stewart says: "We passed a 'Woodland for sale' sign. Much to my surprise, Yvonne said, 'Gosh, that would be interesting', and it amazed me that we shared this mutual interest that we had not talked about. So we looked on the internet for woodland, came across Woodland Investment Management, and contacted them."

In 2002, they paid £20,000 for Cathedral Wood, an eight-acre site (one acre is 43,560sq ft) with a mix of spruce, larch, oak and chestnut trees, near Goudhurst, Kent, and only 35 minutes' drive from their home. Mr Stewart had hankered for more land than their garden, having given up a two-acre smallholding in Cornwall where he lived before marrying Yvonne in 1999. He says: "I am something of an amateur etymologist, and also it is a place to get away from it all. It was not bought as an investment but for the love of woodland and somewhere to relax."

It is also a place that acts as a memorial for their departed partners, both having had 30- year marriages before they met. The wood is also for the couple's five children and seven grandchildren to enjoy. They intend to leave it to the family. But the woodland will not form an inheritance tax (IHT) millstone around the children's necks because it has woodland grant scheme approval from the Forestry Commission. This means the Inland Revenue considers it to be commercially managed and exempt from IHT.

The Caines have to show they are managing the wood rather than moving on to full-scale timber planting and cropping. The latter approach is not something many environmentalists approve of. Charles Ansdell, technical manager at the advisory firm Inter-Alliance, says timber investment in forests or through funds is "a tax mitigation device; the timber index is not exactly sexy".

Angus Hanton, of Woodland Investment Management, says: "There has been a slight increase in prices, with regional variation, but the average cost of a six-acre woodland is £15,000, with the average in the South-east nearer £19,000. Most woodland we deal in is worth less than £60,000 to avoid stamp duty. The other costs are the Land Registry Fee of £50 and your solicitor's fees of £300 plus 17.5 per cent Vat."

Investment in forests is long term. As the supply of forestry is fixed for several years ahead, the price of trees is directly linked to the timber market. Demand for such a basic commodity is linked to house- building, inflation and the economic environment. Mr Hanton added: "Prices are stable, and there is plenty of demand at this level so there is less chance of a fall than a rise."

Paul Bunton of The Woodland Trust is a project manager for the Community Woodland Network. The Woodland Trust is the UK's leading conservation charity dedicated to protecting our native woodland, which set up the network to help woodland groups. Mr Bunton says: "We have had more than 200 enquiries since the autumn from people on woodland purchase. Now we have set up a website for information and we are having a conference. There are a lot of community woodland groups but they have often found they are isolated, and this is an initiative to assist communications among them as well as to help people interested in buying woodland to maintain it."

The website www.yourwoods.org.uk, which went live this month, contains a useful guide, including all the legal and other pitfalls. The main organisation prospective woodland owners need to contact is the Forestry Commission. This government body is responsible for the protection and expansion of forests and woodlands, and helps owners with finance for maintenance and new planting as well as issuing the all-important woodland grant scheme approval.

Paul Johnson, operations manager at the Forestry Commission's Cambridge regional office, says: "Grants are divided into woodland creation ones and others for creating amenities in existing woodland. The type and level of support depends on that particular woodland and what they want to do with it."

For new planting of a small wood with broadleaf trees, the grant is £1,350 per hectare (2.47 acres). But if it is new planting on agricultural land there is an additional £600 per hectare. If your land is among the 12 existing community forests, you can get an additional £600 per hectare. If it is near a conurbation and you design a new woodland with public access there is an extra £900 per hectare. For someone buying existing woodland with little or no new planting involved there are two mechanisms for providing grants: an annual management grant or a woodland improvement grant (WIG).

Annual management grants of £35 per hectare are available for maintaining the special values of a woodland, for instance an ancient or native woodland. Here the commission will pay for open areas to be maintained. The WIGs are three funding schemes relating to biodiversity, enhancement of economic value, and providing and promoting public access.

The commission provides guidance to woodland owners and publishes a free guide. It is being reprinted with updates in the autumn.

WOOD YOU BELIEVE IT?

* Peace and quiet, wildlife and scenery are the main factors which draw people to woods, a study shows.

* Although woodland cover in the UK has increased by more than 25 per cent in 20 years, more than half of UK adults believe our woodlands are shrinking.

* Two-thirds of UK adults would like to see more woodlands in their area.

* More than four in 10 people have a woodland in walking distance of them.

*The UK uses 50 million cubic metres a year for timber, paper, woodbased panels and other wood products.

* The area of woodland in Great Britain, Forestry Commission figures show, is 11.5 per cent of the total surface area.

* The volume of wood from Britain's forests each year was 10 million cubic metres in 2001.

CONTACTS

* Forestry Commission 0131 334 0303 www.forestry.gov.uk

* Woodland Explorer www.naturegrid.org.uk/woodland

* Woodland Heritage 01428 652159 www.woodlandheritage.org.uk

* Woodland Improvement & Conservation 01452 832100 w ww.woodland-improvement.co.uk

* Woodland Investment Management 020 7737 0070 www.woodlands.co.uk