IR48                     29 November 1994

           TAX TREATMENT OF SHORT ROTATION COPPICE

The  Chancellor proposes in his Budget to clarify the way
in which short  rotation  coppice  will  be  treated  for   tax
purposes.

The  Chancellor's  intention is to make it clear  that
short    rotation  coppice will be taxable under Case I of Schedule
D as farming and not exempt as commercial woodlands.

The  legislation will take effect from today.   The
Exchequer effects of this measure are negligible.

                           DETAILS


Short rotation coppice is a way of producing a
renewable fuel for  "green" biomass-fed power stations.     Willow  or
poplar cuttings  are planted on farm land  at  the  rate  of around
3-4,000 per acre.   They are cut back to ground  level after a year.
This    causes them to throw up shoots which are harvested  every
three years or so and made into chips  which are used as fuel.

Commercial  woodlands are outside the scope  of
income tax; and there has been some uncertainty as to whether short
rotation    coppice would be treated as commercial woodland  or as
farming.

As it has more in common with arable crops than with
the production of timber the Chancellor proposes that the
matter should be clarified by legislation.  It  will therefore be taxable
under Case I of Schedule  D  as farming, and hence excluded from
the   exemption for commercial woodlands.

                      NOTES FOR EDITORS

Section  65  and  Schedule 6 of the  Finance  Act
1988 abolished the old Schedule B charge and took woodlands
which are managed  on  a commercial basis with a view  to  profits
wholly    outside the scope of tax.