VAT on Woodland – an update

VAT recovery on management of Woodland

 Will Woodlands, a  charity whose stated aim is tree planting for public enjoyment, heritage enrichment and nature conservation, has won its appeal against HMRC at the First Tier Tax Tribunal.

HMRC had claimed that amenity was non-business use and as such an agreed area calculation that had been accepted for 15 years to calculate recoverable VAT was no longer fair and reasonable and that an income calculation should be used. HMRC also proposed a methodology that attempted to allocate future income each year albeit this is completely impractical for the forestry sector.

Will Woodlands had argued  that, whilst their objectives were conserving and restoring wildlife by acquiring land and establishing woodland, its woodland was managed in the same way as a commercial woodland, other than having slightly higher standards of wildlife protection (eg with more bird boxes and wildflower planting) and greater attention paid to managing public access.

The Tribunal held that the stated objectives in the Charity’s accounts and other documentation was irrelevant, and that the woodland was run on the same basis as a commercial woodland with timber being sold every 20 years or so when thinning took place. There was also a long term aim to fell the timber which was a valid business purposes even though trees would take 100 years to reach maturity.

 David McGeachy, Head of VAT at Saffery Champness commented “This is good news for the sector as it confirms that as long as there is an intention to sell firewood and ultimately to make timber sales then VAT recovery on the costs of managing and planting a woodland should be available. The key is that there is an ability to demonstrate an intention to run the woodland commercially”.