This decision concerns the recovery of input tax by a charity responsible for the maintenance and eventual exploitation of woodland sites across the UK.
In its decision, the FTT dismisses the arguments made by HMRC on two fronts. First in relation to its failure to take basic advice on the way in which deciduous forestry is conducted; second in relation to its proposed business/non business split and partial exemption method. It is quite telling that the HMRC officer in cross-examination, justified his actions in part by reference to the amount of VAT recovered by the business.
In his decision, the judge referred to HMRC’s imposition of an income based apportionment formula to a woodland that would generate receipts over a 150 year period, as akin to comparing apples with warthogs, rather than apples with pears.
A good case study in standing your ground in the face of ill informed challenges from HMRC. I do wonder whether ADR was attempted in this case, as it’s clear that HMRC did not understand the business they were dealing with. ADR may have helped. Further background can be found in the attached article written by Jonathan Main or from the case itself. Both links can be found below.