With all else happening on the tax front, farmers are being advised to be compliant with rules that affect additional Christmas trading ventures.
The fallout from the budget is still very much in everyone’s minds, but Saffery says farmers should also remember to be tax compliant this festive period.
Activities that farms might undertake include winter wonderland type attractions, staging a Christmas fair, or selling Christmas trees, holly wreaths or logs.
Lucy de Greeff, director at the accountant, explains that one of two approaches is usually adopted.
“Either an arrangement will have been made with a third party to run a Christmas activity on behalf of the farm, or that additional trade can be undertaken on an in-house basis."
Farming businesses should consider a number of points, Saffery explains:
• Extent of involvement – is the activity simply one of receiving rent for the use of the land?
• Is VAT chargeable for that use?
• Will VAT be recoverable on any related costs incurred?
• How will income be taxed in the hands of the recipient?
The firm notes that a precedent was set for VAT being due on the hire of pitches at organised events, following the Craft Carnival case in 2016.
This clarified that such activity went beyond simply a license to occupy land which would be VAT exempt.
Ms de Greeff says: “Income from such activities, whether undertaken in house or contracted in clearly needs to be declared and included in the appropriate section of the tax return.
"Keeping good records of income and expenditure at the time would be advisable to save a scramble after the tax year end has passed."
Saffery says the VAT status of any seasonal activity is crucial, for example, a farmer selling Christmas trees will need to account for VAT on the sales price.
Similarly, letting land that has been ‘opted’ to tax to a third party for them to undertake a commercial venture will mean that the operator will need to pay VAT in addition to the agreed fee for the use of the land concerned.
“Seasonal activities can also require temporary staff, and any staff taken onto the payroll, even if for just a few days, and no matter how they are paid, will be subject to normal PAYE rules and RTI reporting," Ms de Greeff concludes.
