Ejected Farmers Could Be Entitled To Compensation

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Farmers who HMRC have ejected from the Agricultural Flat-Rate Scheme (AFRS) may be entitled to a repayment or compensation.

An opinion from the advocate general to the European Court of Justice has led to the belief that many who feel they have been unfairly removed from the VAT simplification scheme may be able to make compensation claims or ask to re-join the scheme.

The AFRS is a simplified scheme under which farmers with qualifying agricultural forestry or fishing activities do not have to submit VAT returns. Instead they receive a flat rate compensation of 4% on the value of their sales. It is thought to be used by several hundred UK farmers.

In some years some farmers will gain a net benefit and in other years they may suffer a net loss. HMRC take it upon themselves to withdraw farmers’ AFRS certificates if the compensation they receive from the scheme results in a farmers gaining a greater benefit than he would under a normal VAT registration.

The opinion of the advocate general felt that farmers cannot be excluded for reasons other than specified under the European VAT directive. Instead it could be deemed that the withdrawing of certificates is an indication that HMRC are failing to properly implement and regulate the scheme.

While the European Court does not always agree with the opinions of its advocate generals, if it were to do so in this case, many farmers wrongly removed from the scheme would be entitled to a VAT refund or some other form of compensation.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

HMRC Not So Merry With Wedding Venues

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Farmers hiring out land and buildings for wedding ceremonies may have to pay back thousands in back tax following a failed VAT appeal earlier this year.

Blue Chip Hotels failed in their appeal to overturn more than £50,000 in VAT. The company argued that, as it didn’t offer room hire for civil wedding ceremonies as part of its package, VAT was not due.

However the upper tribunal ruled that, to meet wedding license regulations, the hire would not qualify as tax exempt ‘passive renting of a room’ and would therefore be liable to VAT for the whole amount, totalling more than £50,000.

The case demonstrates that the hire of any room for similar purposes is unlikely to be VAT exempt when there are a number of regulations that a commercial provider is required to meet.

It also raises a number of considerations for farmers planning organised events on their property such as wedding receptions, or concerts held on their grounds. If HMRC challenge a VAT return, farmers could be liable to pay up to four years’ worth of back tax.

If you have any queries it is always best to check with your adviser. Green & Co have a dedicated VAT department who can advise on a whole range of VAT matters. To speak with one of the team contact us on 01633 871122.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

VAT Payable On Full Cost Of Temps

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Farms and rural businesses who hire temporary staff through an agency must continue to pay VAT on the wages of those workers, and not just on any commission that is due.

A tribunal has ruled that VAT at the standard rate is due on all amounts charged to a client for the supply of temporary workers’ services, which could include salary, national insurance and pension contributions.

It follows an unsuccessful challenge by global HR staff provider Adecco, who tried to argue that VAT should only be charged on the part of the payment that related to its commission for introducing the worker to the business using them.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of Rasmus Thomsen at FreeDigitalPhotos.net

Happy Holidays From Green & Co

20151218_133025232_iOS.jpgAs we take our Christmas break at the end of another productive year, we would like to take this opportunity to thank you, our loyal blog readers! Whether you are already a client, a prospective client, or just like to read our informative articles each week, it is you who keeps this blog going.

Working with our clients in 2015, has also helped to grow Green & Co’s services, allowing us to assist our clients in both setting and achieving their goals. Our services span from general accounts to business goal setting and much more…

  • Year-end and management accounts
  • Tax returns and tax planning
  • Auditing
  • VAT and bookkeeping
  • Payroll (Including Auto Enrolment)
  • Construction Industry Scheme (CIS)
  • Sage Training
  • Business forecasting and goal setting
  • Exit strategies
  • Profit improvement
  • Profit extraction
  • Corporate re-structuring
  • Inheritance tax review and estate planning
  • Virtual office services

Green & Co also specialise in accounting for a number of fields:

  • Doctors
  • Property developers
  • Independent financial advisors
  • Solicitors
  • Insurance brokers
  • And of course, farming!

If you would like to know any more about any of the above, please give our friendly team a call on 01633 871122 once we are back from our Christmas break – refuelled and recharged to combat another year together!

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Farmers Targeted In Latest VAT Scam

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Welsh farmers are being warned to be extra vigilant and not to respond to communications supposedly coming from “UK Data Control” asking for details of missing VAT numbers and other business details.

The letters look official enough, but by signing and returning the form, the signatory agrees to pay an amount of £790 for the publication of their details on a website, as per the small print.  Farmers, in particular, are being targeted and FUW is worried that its members will be fooled into thinking this is a genuine government communication.

Anyone receiving such a request should contact their local trading standards office. If you are in doubt about the validity of any communication from any Government Department, contact HMRC direct or ask your tax advisor for help.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Road Fuel Scale Charges From 1st May

fuel-gauge-163728_1280The VAT Road Fuel Scale Charges have been amended with effect from 1st May 2015. The new rates can be found here.

If a business is VAT registered and purchases road fuel for business use, but there is also private use of a vehicle, then an adjustment needs to be made to ensure that VAT is not reclaimed on the private element of the fuel consumed. To simplify this process, a business may use Scale Charges to add back a fixed sum to account for this private use. This can be done monthly, quarterly or yearly.

As is the same with fuel and car benefit, CO2 banding of the vehicle is used to dictate the amount of the Scale Charge to be applied.

However, for some businesses, claiming input VAT on fuel and then having to apply the Scale Charges may not be financially beneficial.

To see whether this would be applicable for you, contact us at Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Barn Conversions And Tax Planning

 

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There has been much publicity about the current Housing Crisis, and the Government has recognised the need to encourage new housing development. In England ‘permitted development rights’ have been extended to allow more development of farm buildings for residential use. This is a positive move for house buyers, the rural economy and land owners.

However, any property development has substantial tax implications that must be considered at an early stage. These include:

  • VAT – this can range from 20% to 5% to Nil
  • Income tax – this will depend on who owns the property
  • Capital Gains Tax (CGT) – a liability of up to 28% can arise if the property ownership is not planned correctly.
  • Inheritance Tax (IHT) – this can be 40% if the property ownership is not planned correctly.

The type of situation we often see is a family farm owned by a father and farmed in partnership with his son. The farm includes a barn which is going to be converted and occupied by the son. Changing the ownership of the barn to the son before the development could:

  • Reduce the VAT cost from 5% to Nil
  • Reduce any future CGT charge from 28% to Nil
  • Avoid the house forming any part of father’s estate which could reduce the IHT charge from 40% to Nil.

In almost all situations time spent on planning before the development starts will substantially reduce the cost of the development.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

 

Renewable Energy – Making Farming Greener

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Historically, farmers have provided for the population by producing the basic necessities of life such as food and clothing materials.  In modern times, energy is the most precious  and yet essential of commodities, so it seems only natural that the evolution of farming should include the supply of renewable energy.

From  hosting wind farms and solar panels to the installation of  anaerobic digestion systems, farms are the perfect vehicle for continuing the re-invention of the word “green”. With recent poorer harvests and the adverse economic climate, investing in renewable energy projects can make good use of both available land and farming by-products, and can offer a more secure source of income.

Solar panels are an important option but factors such as location, the lie of the land, planning permission, visual impact and possible local objections should be considered. These could all affect the value of the investment and subsequently your return.

There are financial issues and tax implications which need to be considered and advice should always be sought from an Accountant before entering into any agreement. For instance, it is very important that any land used for renewable energy of any kind retains its agricultural status,  otherwise the entitlement to Agricultural Property Relief may be lost when the land is disposed of or bequeathed, and this could raise issues with Inheritance Tax.

The cost of the solar panels will normally qualify for capital allowances and you can get tax relief of up to £500,000 from 1 April 2014.

Any income received will be taxable as business income unless it comes from leased land, in which case it will be taxed as rental income. It’s also important to remember that any energy sold to the National Grid attracts output VAT and must be included in returns and paid over to HMRC in the same way as any other taxable supply (although the Feed-in-Tariff is exempt).

Should you require any further information or advice please do not hesitate to contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Exempt Supplies: Do You Reclaim VAT On Them?

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Many farms make Exempt supplies such as let cottages or stabling. This means they do not have to charge VAT on that income.

The basic rule of VAT is that input tax cannot be reclaimed on any costs directly relating to exempt supplies.  However, if you have a mixture of taxable and exempt supplies you are considered partially exempt.  Being partially exempt means you CAN reclaim VAT on expenses incurred on the rented cottage or stables, PROVIDED you pass partial exemption de minimis tests. In addition to reclaiming VAT on agents’ fees, this  will also cover repair expenses.  If you are planning to renovate your cottages or put a new roof on the stable, the VAT saving could be quite significant.

There are three tests for qualification for de minimis. The first , for example, states that if total input tax is no more than £625 per month on average, and the value of exempt supplies is no more than 50% of the value of all supplies, then  you can reclaim back the exempt input tax.

You need to keep separate figures for exempt and taxable income and separate figures to show purchase VAT entirely for taxable supplies, purchase VAT entirely for exempt supplies and purchase VAT which could be for either supply (e.g. accountancy).

The VAT year ends on 31 March, 30 April or 31 May depending on your VAT quarter.

As the VAT year end now approaches, it is worth considering doing improvements before the year end.  This might spread your Exempt VAT over 2 years and so increase the chance of qualifying under the de minimis rules!

If you need further advice and guidance please contact Green and Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Farmers, are you aware that you have to charge VAT for storage space?

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It is not uncommon for farmers to rent out unused buildings for storage.  However, beware!!  It is not generally known that the introduction of VAT on self-storage in October 2012 also affects you!

As the legislation referred to self-storage, it was not fully understood what impact it would have on other trade sectors.  Although the legislation was termed self-storage, HMRC defined the granting of facilities to a person, for the storage by them of goods, or a storage facility which is empty, as standard rated – facilities being a unit, container or building.

In August 2013, HMRC issued a VAT information sheet (10/13) (Click here to view) which cancels the sheet on self-storage and is now named “Provision of Storage Facilities”.  This notice clarifies that there is no difference between “storage” and the term “self-storage”.  Therefore, if, for example, you rent your barn to a neighbouring farmer to store his machinery over the winter, you must charge 20% VAT!  It is no longer an exempt supply.

It will also be necessary, if you have not properly accounted for VAT, to rectify this going back to October 2012.

The standard rating does not apply to the storage of live animals or for bare land used for storage purposes.

Should you wish for VAT-related advice specific to your business, please contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.