Kieran Coughlan: Small scale forestry now a real option

The option of planting forestry is often dismissed by farmers when it comes to choosing their farm cropping plan.

But farming with forestry deserves serious consideration, given the relatively low and even negative margins of the mainstream enterprises.

According to recent data from the IFA forestry sector, some mature sitka spruce plantations, which could be ready for clear felling within 30 years of planting, can deliver a return of €25,000 per hectare, or €10,000 per acre, at clear felling.

That’s a return of more than €330 per acre for each of its 30 years of growth, and all income-tax free.

The Irish tax code, has for decades, allowed an exemption from income tax in respect of certain profits arising from the occupation of woodlands managed on a commercial basis.

In addition, afforested land can benefit from annual income-tax free premiums of €440 per hectare (€178/acre) in the case of the most popular forestry type, enclosed land planted under Sitka spruce.

Premiums are now paid over a maximum period of 15 years (the term depends on the plantation mix).

Similar to clear felling profits, annual forestry premiums are also treated as exempt from income tax.

Under the EU 2015-2019 payments schemes, land that’s afforested can continue to be eligible for basic payment scheme payments under the following strict conditions.

* The land to be afforested was declared on a 2008 SPS application form.

* The applicant who declared that land on a 2008 SPS application form was paid under the 2008 single payment scheme.

* The afforested land was eligible for payment in 2008.

* The afforested land meets all the requirements of the afforestation grant and premium scheme.

An interesting aspect of the current forestry scheme is the facilitation of small plots for broadleaf plantations, as little as 0.1 of a hectare (quarter of an acre), with larger plot sizes applicable to conifer plantations.

The relatively new concept of “agro-forestry” planting is also covered under the scheme, with plantings of as little as 0.5 ha.

Agro-forestry covered under the scheme is the practice of growing trees in a pasture-based setting (called silvo-pastoral agro-forestry), which is the planting of trees amongst pasture land at relatively low stocking rates of at least 400 plants per hectare at equal spacing.

Annual premiums under this scheme are for a five-year period rather than the longer periods of up to 15 years for more traditional type forestry.

With these smaller plot sizes starting at 0.1ha for broadleaves, the objective of an increase in the national area planted under forestry becomes much more achievable, should more and more farmers choose to plant smaller parcels of land, rather that the historical approach of planting whole farms in marginal areas.

At individual farm level, forestry becomes more acceptable and compatible with commercial farming.

As farmers, many of us can point to a some area in our farms which is wet, dangerous to work, awkward to work, or which — if afforested — could benefit adjoining land with shelter, aesthetics, or offer a nature corridor.

The prospect of income-tax free premiums, income-tax free clear felling at maturity, and continuity of basic payment scheme entitlements (where applicable) has serious financial incentives.

Of course, forestry is a significant and very long-term commitment, with felling licences required for tree removal and replanting after clear-fell being the order of the day.

But being allowed to select relatively small sites means farmers can be much more comfortable with their choice.

Indeed, some farmers who have planted difficult ground are relieved to have taken the danger out of farming this tricky ground, for their own sake and for coming generations.

Meanwhile the tax breaks for forestry have been enhanced. 

The removal of forestry income from the high earners’ restriction (which restricted the amount of tax-free forestry income to €80,000 per annum) will be of huge benefit to those who undertake clear-felling from 1 January 2016 onwards.


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