I studied forestry at Aberdeen University at the time of the rapidly expanding afforestation of the Flow Country of Caithness and Sutherland. One day, the Chief Executive of Fountain Forestry, the company that was the leading player in this misadventure, gave a lecture to us. Afterwards, he invited questions. “Why, I asked, was the Government giving huge tax breaks to folk like Terry Wogan and Shirley Porter – the vulgarians of the metropolis in London – to plant trees in the far north of Scotland? Why did it not simply award the money in the form of grant aid to the crofters and farmers of the region to plan the trees instead?” It was a naive question but I quickly learnt that asking such questions was not welcome, even in a University where asking questions is meant to be what one does.

Ever since then I have been curious as to why a land use with so much potential to revitalise rural economies, support communities and provide a home and workplace for families like it does in the rest of Europe should instead be an elite formation designed to enrich a landed class drawn from anywhere but the locale. Some of the facts behind this are explored in a recent report I wrote – Forest Ownership in Scotland.

The topic is brought to mind today by the advertisement of a 403 hectare forest for sale in Kincardine-shire. Burn of Sheeoch (pictured above & sales brochure here) is offered for sale by Bidwells at a guide price of £2,500,000. It was bought in 1982 for £441,000 by the Post Office Staff Superannuation Fund from Baron Craigmyle and planted in 1983-84 with substantial public grants. In 1995 the Fund sold it for £200,000 to Spero Nominees Ltd., a nominee company with a fully paid-up share capital and total assets of £4 and wholly owned by Deloitte & Touche Holdings Ltd. (see below).

In other words this forest was acquired by a global accountancy firm on behalf of someone – we know not whom. In 2007 the land was transferred for free to a company called Walbrook Trustees (UK) Ltd. which is wholly owned by Barclays Wealth Advisory Holdings (Guernsey) Ltd. The 2012 accounts of Walbrook describe the company’s principal activity as the “provision of trust services“. It made no profit or loss in 2012, has total assets of £7,650 and “it is anticipated that the Company will be put into Member’s Voluntary Liquidation during 2013“.

But not before Roderick Leslie Melville has earned a nice commission on  a sale of £2.5 million which will be paid to a ghost company in Guernsey about to go into liquidation. The forest “benefits” from a Long Term Forest Plan approved by Forestry Commission Scotland in April 2013 providing access to a “range of forest management grants“.

The seller (Wallbrook, Guernsey, soon to be liquidated) will also be “entitled to share in the benefit of any renewable development at the property and receive 50% of all payments by or on behalf of the landowner within the 10 years following sale and shall be entitled to these payments for a period of 25 years from the date the first payments are received.”

So my naive question of 30 years ago remains unanswered. Vast sums of public money have subsidised the creation and ongoing management of this forest and future revenue streams of public money for renewable energy contracts will also flow to some anonymous offshore nominee company following receipt of a capital tax free payment of £2,500,000.

I don’t understand why the Scottish Government and Parliament continue to preside over such a scam.


  1. Are you sure the sale will be capital tax free? Is it not the case that, although any gains in the value of the timber will be exempt, gains in the value of the land it’s standing on will be subject to Capital Gains Tax/Corporation Tax in the normal way?

    BTW, is the answer to your naive question not that forestry grants are awarded to crofters and farmers as well as Shirley Porter et al?

  2. In theory capital gains should be paid on the increased land value at around 18 per cent. However, this will be minimised or avoided through accountancy measures, for example if the owner is domiciled outside the UK or the company itself is located in a tax haven. IF any tax is paid, it certainly won’t be enough to offset the amount of subsidy the forest already contains. The forward plan for the forest suggests further subsidies will be forthcoming from the FC. The current owners and the new owners will benefit from any profits from renewables planned for the forest and these will also contain a significant public subsidy. In other words for private land owners, the public purse is simply the gift that goes on giving.

    • Thanks for your reply Penny but Andy’s presentation suggests that ownership of the forest is not outside the UK or in a tax haven but vested in a UK registered company (Walbrook Trustees (UK) Ltd). That being so, I’m not understanding why Corporation Tax at a rate between 20% (small profits rate £1.5m) should not be applied in full to any capital gain in the value of the land (not the timber). I’m still not convinced the sale will be “capital tax free” as Andy stated.

      And maybe I’m being nit-picking but you said “If any tax is paid, it certainly won’t be enough to offset the amount of subsidy the forest already contains.” Surely even the most enlightened system would not involve all of a subsidy given with one hand being clawed back in tax by the other!

      And just reviewing this comment before posting it (and this is NOT nit-picking), Andy says ” a sale of £2.5 million which will be paid to a ghost company in Guernsey” and “The seller (Wallbrook, Guernsey, soon to be liquidated)”. Is the seller not Walbrook Trustees (UK) Ltd incorporated in the UK??

      • Given that Walbrook Trustees (UK) Ltd. has total assets of £7650 whilst “owning” a £2.5 million forest suggests to me that it will not be paying any Capital Gains tax. Or perhaps I should raise an action for false accounting.

        • OK, so it looks like Walbrook Trustees (UK) Ltd is the corporate trustee of a trust. That trust will be the beneficial owner of the forest and should pay the CGT.

          What makes you say the sale by the trust will be capital tax free?

          Is the liability of a trust to CGT not fixed by the “residence” of the trustee(s) in the UK (TCGA92, s69(1))?

  3. Reiner Luyken

    In this, I have to largely agree with Andy. The forestry grants were, and are, a scandal. Of course Neil is right, crofters are beneficiaries as well. Huge tracts of land are fenced and cleared for the benefit of people like Paul Dacre who railed against subsidies in the Daily Mail before he became the proud owner of Langwell Estate and started planting “native” species, as it is done nowadays to make the whole thing more palatable. Right next to his estate is a huge tract of former common grazing ground where the crofters cashed in. There is talk of recreating a mythical Caledonian Rain Forest. But the subsidies do what most subsidies do – they create a new imbalance. Deer are confined to ever smaller areas where they are being hunted down like vermin. Sheep have virtually disappeared from the hills. The Highland ecology is turned upside down for no good reason other than for making a quick buck.

  4. Jamie McIntyre

    It is curious that the tax arrangements for forestry have not been revisited even in this age of austerity. One of the most basic questions I have yet to see satisfactorily answered is why if public subsidy is available for forestry (which I have no quarrel with on account of the potential public benefits arising), any of it should be made available via tax reliefs rather than grants for positive management. The usual knee-jerk response to this is that many of the reliefs are not unique to forestry but agriculture also – but one is tempted to say that two wrongs don’t make a right. Certainly experts on tax affairs such as Professor James Mirrlees said in his recent landmark report on the tax system (with reference to IHT) that as a minimum reform to the system, agricultural relief should be ended.

    The reasons why tax reliefs are undesirable as compared with management grants are many and varied:
    – firstly, as other comments above have noted, grants are available to anyone, irrespective of means. By contrast, some tax relief are only available to the wealthy, or are personal reliefs unavailable to eg a community owner. Thus in the interests of equity, grants are to be preferred.
    – tax relief is a very blunt instrument, and rewards ownership more than management. The hope is that money will be reinvested in forestry, but actually the financial incentive is generally to spend as little as possible. By contrast grants can be targeted at specific positive outcomes and only represent a contribution to costs, so if set at a correct level should have no distorting effect on land values
    – finally, some of the tax arrangements incentivise damaging activities. For example, income tax relief is available on sales of round logs but not sawn timber. So if an enlightened forest owner decides to bring in some mobile equipment and process timber on site, adding value and engaging local contractors, plus minimising timber miles of unprocessed material, he will be taxed on his sales income. If however he simply puts his logs on a lorry and sends them to a mill 50+ miles away, where the benefits accrue to external community but the impacts (eg haulage) are local, he will be rewarded through paying no tax on his sales.

    There has been discussion in the past about reforming the tax arrangements for forestry by extending them to incentivise positive social and environmental outcomes. Personally though, for the reasons above, I would scrap tax relief completely and redeploy all public subsidy through the grant system.

    I would take issue with Andy’s title though. It is possible to get instantly rich by planting huge areas where the grants fail to adequately reflect the economies of scale of these vast operations, leading to instant or near-instant profit. But the surer way to get rich (or more accurately, get richer) is to use forestry as a way to recycle capital and income in such a way as to avoid tax. Why it is acceptable in the 21st century for taxpayers of ordinary means to pay their taxes, but the wealthy to claim relief in this way, is beyond me. It would however be purely an ethical debate were it not for the fact that it has led to a model of forestry which is almost unique in the world in its exclusion of ordinary people from the ownership and management of forests.

  5. Andy, my probably naive answer to your naive question is: the Crofters are not on the fat-cat merry-go-round and would keep wealth created local!

  6. Another anomaly in the present system is that, the RHI can only be claimed on certified timber. How does that work? On the one hand we’re encouraged to create hubs where locally managed farm and community woods can provide local
    wood fuel, but most of it is uncertified due to high cost of certification and lack of economy of scale.