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-
a) the trees purchased, or most of them, are mature (that is
ripe for cutting), and
b) 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
c) 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.
