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HMRC internal manual

Business Income Manual

Timber merchants: purchase of standing timber

In view of the decision in Hopwood v C N Spencer Ltd [1964] 42TC169, purchases of standing timber by a timber merchant should normally be regarded as purchases of stock in trade where:

  1. the trees purchased, or most of them, are mature (that is ripe for cutting), and
  2. a proprietary interest in specific trees is acquired, as distinct from a right, stretching over a lengthy or indefinite period, to go into woodlands and fell trees to be selected, and
  3. the purpose of the purchase is to provide the timber merchant with stock which he or she needs to carry on the business at the time of the purchase or will need within a reasonable period thereafter.

Where all three conditions are not satisfied - see, for example, Hood Barrs v CIR (No.2) [1957] 37TC188 - the cost of acquiring rights over standing timber should be regarded as capital expenditure.