Income Tax (Trading and Other Income) Act 2005 section 156

Purchase or sale of woodlands

Section 156 deals with how profits are calculated for a trade of dealing in land where the land purchased or sold includes woodlands with growing trees or saleable underwood.

• When a land dealer buys UK woodlands as part of their trade, the portion of the purchase cost attributable to trees or saleable underwood growing on the land is excluded from the trade expenditure calculation.
• If the woodlands are later sold with trees or underwood still growing on the land, an equivalent portion of the sale price is also excluded from the trade receipts calculation.
• The exclusions ensure symmetry: because profits from commercial woodlands are exempt from income tax, neither the cost nor the corresponding sale proceeds of the trees and underwood form part of the land dealing profit calculation.
• This rule applies only to woodlands purchased under contracts entered into on or after 1 May 1963.