Hello, I'm Keith and happy to help you with your question.
I concur with HMRC! I don't understand what your Forestry Consultant is on about either, though I can make an informed guess.
A wide range of tax incentives and grants are in place to encourage private ownership of woodlands in the UK.
Professional forest management, combined with careful tax planning, can lead to reliable and competitive returns from what can be a highly tax-efficient investment. You are affected by both Income Tax (IT), Capital Gains Tax (CGT), and Inheritance Tax (IHT). IHT only kicks in if you die and its appearance removes CGT from the tax equation.
The income and profits from timber sales in woodlands managed commercially are free from IT.
The gain in value of standing timber, whether from the physical growth of the trees or rises in timber prices, is entirely free from tax. The sale price or transfer value of the trees is also left out of Capital Gains Tax calculations. Only the increase in the value of land is assessed for CGT in the event of an ultimate disposal.
Here the rules change. If the sale of your timber is going to raise over 81K annually or in any one year then you must register for VAT and charge VAT output tax on the invoice for your timber sale price. Then if you are registered any VAT input tax paid for goods and services, eg external management, tree felling contracts and the like can be reclaimed in the quarterly VAT return and if input tax exceeds the output tax HMRC will pay you the difference. If, of course, it's the other way around then you pay the tax man!
I do hope I have spread some light for you through the glades of woodland taxation.