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HMRC internal manual

Business Income Manual

Timber merchants: owner occupation of woodlands

S172C Income Tax (Trading and Other Income) Act 2005, S158 Corporation Tax Act 2009

Where a timber merchant buys and becomes the occupier of woodlands from which to draw supplies for the merchanting business, he or she should be regarded as acquiring a capital asset the cost of which is capital expenditure. Profits arising from the occupation of commercial woodlands are not to be regarded for any purposes as chargeable to tax as trade profits (see BIM67701). Trade profits arising from carrying on the business of timber merchant are taxed in the normal way.

Timber from felled trees taken into the merchanting business should be treated as purchased at market value in computing the profits of that business.

Following CIR v Williamson Bros [1950] 31TC370 and Collins v Fraser [1969] 46TC143, the activities of the occupier of commercial woodlands which amount to no more than normal preparation for marketing the timber, up to the point of sawing into planks, are exempt from Income Tax and Corporation Tax. Sales of timber processed only to that extent should be excluded from the computation of trade profits as should the expenses incurred in felling and preparing it to that stage. Where activities that go beyond normal marketing take place, the timber should be regarded as appropriated to the merchant’s trade at the market value of the sawn planks with subsequent sales being included in the trading accounts at their full value.