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Supplementary memorandum submitted by the Department for Environment, Food and Rural Affairs (Defra) (TNF 05A)
The National Forest
Q1. How did The National Forest project originate? Please could you provide a brief history of the decision making process leading up to the selection of the area to become The National Forest? A. I understand that the National Forest Company have supplied the summary of the consultants' report on the New Midlands Forest produced for the Countryside Commission in 1989 and this provides all the information the Committee requires. Q2. What were the original Government objectives for the Forest and how was delivery against them monitored? Has this changed over time? A. The Government adopted the proposal for the National Forest in October 1990 and agreed that its aim should be to create and demonstrate a modern multi-purpose lowland forest that would meet multiple environmental and economic objectives.
· To enhance and create a diverse landscape and wildlife habitat · To create a major recreation and tourism resource · To provide an alternative productive use for agricultural land in a manner that meets environmental objectives · To contribute to the national timber supply · To stimulate economic enterprise and create jobs · To stimulate community involvement and educational use of
the · To contribute to wider environmental objectives such as a reduction in carbon dioxide in the atmosphere
The original National Forest Strategy 1994-2004 set out how the objectives for the Forest were to be delivered. The National Forest Company reported annually on implementation of the Strategy. In 2003 the NFC undertook and, had independently verified, an audit of the 1994 Strategy. The audit identified activities and targets which remained relevant and also those which were no longer relevant. The findings were incorporated into the current National Forest Strategy 2004-2014. In addition to reporting annually on implementation of the key objectives the NFC, as required by the Strategy, carried out a mid strategy review in 2008/09. This included an audit of progress which confirmed the continued relevance of the Strategy and a public consultation with residents and partners which identified new priorities and ways of working. These include an increasing focus on maintaining what has been created to make the most of the Forest's expanding assets. The revised Delivery Plan, which I approved last March, sets out how the NFC, working with its partners, will continue to implement the Strategy including taking forward new streams of activity in the period to 2014.
Q3. Defra provides £3.6 million grant in aid, however the project levers in considerable amounts of funding. What is Defra's calculation of the rate of return on its investment in the Forest and how does this compare to other similar projects? Can you quantify the value of the project in broad terms, including economic value added? A. The National Forest Company's 'Much more than trees' research report in 2004 updates the earlier 'National Forest: Social and Economic Impact Study 2001. The 2004 study identified a number of headline indicators which give a broad profile of the socio-economic health of the National Forest. The National Forest Sustainable Development published in 2007 further refined the indicators and identifies and reports on 20 environmental, social and economic indicators. However we do not have a comprehensive current valuation of the project. We recognise the need to undertake a more comprehensive assessment of the full social, environmental and economic benefits of the Forest and we will work with the NFC to produce this in the next few months. Q4. What is the position with regard to the inclusion or exemption of woodland assets (in respect of land and of timber) for liability for inheritance tax? Is this an issue that has been raised with Defra by landowners and has Defra raised this with HMRC? A. Inheritance Tax (IHT) applies to both the land and the trees. Inheritance Tax is charged, at death, on the net value of a person's estate (their assets less their liabilities) immediately before death, and in respect of gifts made within the prior seven years. Transfers made between 3 - 7 years before death may qualify for what is known as Taper Relief. This effectively reduces the amount of Inheritance Tax payable. For the current tax year, Inheritance Tax affects those individuals with estates worth over £242,000 (known as the nil rate band). Any value over this limit is charged at a flat rate of 40%. Certain exemptions may apply that could reduce the value of the estate. There are also certain reliefs that could reduce the tax payable. Woodlands (both timber and land) managed on a commercial basis (i.e. for a gain) will be eligible for 100% Business Property Relief after two years ownership so that no tax would be payable. Any CGT liability on the asset which has been held over or rolled-over will be extinguished. If a woodland were gifted as a business property before death, the Business Property Relief would continue provided the done retained the woodland in the same condition until the donor's death or for a period of seven years after the date of the gift. Amenity woodlands attract Agricultural Property Relief if they are also occupied in conjunction with agricultural property. This relief is attracted, depending on the circumstances, at 100% or 50%. Woodlands of outstanding scenic, historic or scientific interest may qualify for Heritage Relief allowing a conditional exemption from inheritance tax. There is a specific relief for transfers of woodland on death, provided the deceased has been the beneficial owner of the woodlands for at least five years immediately before death or became beneficially entitled to it by gift or inheritance. However, this has become less important since the introduction of 100% relief for businesses that qualify as relevant business property. When a woodland in the United Kingdom is transferred on death, the person who would be liable for the tax can elect to have the value of the timber, that is, the trees and underwood, (but not the underlying land) excluded from the deceased's estate. Instead, tax is charged on the future net proceeds of the timber, if it is sold, given away, or disposed of before the land on which it was growing is transferred again on another death. Deduction against the proceeds can be claimed for costs of sale, and costs of replanting within three years of sale. The rate of tax chargeable on the disposal is found by treating the taxable amount as the top slice of the deceased's estate. For this purpose, the deceased's estate includes any sale proceeds or value charged to tax on previous disposals since the death. Once the timber has been transferred again on another death, tax is not chargeable on later disposals. The woodland relief is not available for (1) an outright lifetime transfer; (2) a transfer by a close company; (3) woodlands held on discretionary trust; (4) woodlands which are on agricultural property. This issue has not been raised by landowners with Defra and the Department has not raised it with HMRC. 5. What is the rationale for the exact figure of 300 hectares as the limit to the landholding by the National Forest Company at any one time? Is there any possibility for flexibility in the application of this?
A. The figure of 300 hectares is a delegated limit in the Financial Memorandum between the NFC and the Department. I understand that the origin for the actual figure was based on average yearly land acquisition by the NFC adjusted to minimise the number of occasions when they would need to seek approval from the Department. The Financial Memorandum allows the NFC to seek approval from the Department to hold more than 300 hectares at any time. In addition the Financial Memorandum is periodically reviewed and if the NFC consider the limit needs to be adjusted then they can propose this as part of the next review.
February 2010 |