Farmers may be eligible to apply for the Agricultural Flat Rate Scheme, as an alternative to voluntarily registering for VAT.
Joining the scheme means that you can add a 4% Flat Rate Addition (FRA) to Vat-registered customers when supplying any of the qualifying goods or services, even if they would normally be zero-rated under normal VAT rules. You cannot, however, claim any Input VAT on overheads or capital expenditure, but, unlike Output VAT, the FRA can be retained by way of compensation, and you do not have to complete any VAT returns. Your customers will be able to re-claim the FRA as Input Tax in the normal way.
To apply a farmer can be involved in any of the following activities:
- Crop production – including vegetables, flowers, ornamental plants, mushrooms, spices, propagating materials and nursery plants.
- Stock farming – including poultry, rabbits, bees, silkworms and snails.
- Forestry – including the processing of one’s own grown timber.
- Fisheries – including fresh-water fishing, fish, mollusc, crustacean and frog farming.
Those who only process qualifying produce, or raise or train animals for the domestic market, are disqualified from joining the scheme.
You can still join if you have diversified into other areas alongside your qualifying activities, for example, running a bed & breakfast or a riding school, but your turnover from these other activities must remain below the VAT threshold (currently £85,000).
If you are already voluntarily registered for VAT, you can de-register to join the scheme, provided your business continues to meet the qualifying criteria.
For more information on the Agricultural Flat Rate Scheme contact our team at Green & Co.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.