Owain Thomas QC successfully represented Will Woodlands, a private woodland charitable trust in an appeal against HMRC’s decision to resile from a business/non-business method for the recovery of input tax incurred in the running of several large woodland estates.

HMRC sought to restrict the input tax incurred in running the woodland on the basis that some of that input tax related to a nonbusiness activity whereas historically only areas devoted to free grazing had been the subject of any restriction.

Instead HMRC proposed a method based on income where the level of income sales of timber was compared with the level of income from grants and investments in order to derive a percentage recovery.

The case therefore amounted to a full scale challenge to the ability of charities to recover input tax where the ultimate purpose of the economic activity is charitable and where the business may not be immediately or ever profitable.

Further HMRC’s challenge was based at least in part on viewing the subsidies received as providing a basis for restricting input tax recovery. The FTT dismissed HMRC’s objections to the method and upheld Will Woodlands’ position.

It discussed many of the recent cases, including the CJEU judgment in Sveda (where Owain represented the UK) on the scope of input tax restriction for non economic activities for environmental facilities to which the public have free access and decided that the woodland business was run along conventional business lines and was, therefore, to be considered as economic activity and that therefore no restrictions of the type asserted by HMRC were warranted.

Owain Thomas QC was instructed by Phil Salmon of Hays Macintyre.