The Accidental Smallholder Forum
Community => Coffee Lounge => Topic started by: brigadier on March 05, 2014, 12:24:54 pm
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Hi, sorry if this is repeating anything. Ive just started and went to see my accountant the other day. We've used him before for small stuff and he is local....however, it didnt go well, (I did check to make sure he was familiar with small holdings), firstly he had double booked me so had to come rushing back, then he didnt have a pen, he had to borrow mine.
It was like pulling teeth, he didnt volunteer information or help, I had to press him for info on the few things I had learned from a friend. I realised there was no way he was going to be useful except for form filling and filing.
So...... whilst I am looking for another accountant, (I may have someone sorted) and bearing in mind Im a start up what do I need to do to maximize my income. Is there anyone on the forum who is good with this side of things?
thanks so much.
ps Im doing four sheep for wool
duck eggs and bees.
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An accountant can't really help with that - only you know your business and what you can sell or can't - market research is what you could do - ask other smallholders in your area, ask neighbours, friends what they'd like to buy from you. Go to your nearest suppliers of agri goods and ask them. Decide what you can supply and take it from there.
An accountant can help you with costs and profit margins once you have decided.
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With regard to legitimate business expenses, what is allowable against tax etc, we went to a couple of seminars run by HMRC specifically designed for new, self employed business owners. I think they have stopped doing live sessions, but there are web based seminars on the HMRC website shich you might find useful.
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With regard to legitimate business expenses, what is allowable against tax etc, we went to a couple of seminars run by HMRC specifically designed for new, self employed business owners. I think they have stopped doing live sessions, but there are web based seminars on the HMRC website shich you might find useful.
in Scotland there are business gateways and they help with business start-ups including tax and accounting courses for free. they were really handy. I do my own books and self-assessments.
when we first moved here the old owners were adamant I saw a farm accountant but it was a waste of time and I regretting going.
til you know what you are doing they can't do much to help. instead focus on your business, website and marketing and until you have a healthy profit - an achievement in itself - do the accounts yourself. its not difficult. there are good bookkeeping diaries in wh smiths that help you do it properly.
if you are making a packet, off-setting against another business or vat registered , then an accountant may be helpful.
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I have found that Business gateways can sometimes confuse issues though, although they give good advice otherwise.
They will tell you to have a separate current account and credit card for the business, but in practice if you have four cards in your pocket you are quite likely to inadvertently use the wrong one if in a hurry, So I always advocate only having one bank card and one credit card and doing an analysis between business and private as you are going along - how many times have you gone to tesco and bought paper and envelopes for the business and groceries for yourself? Too much of a faff to pay for them separately - far easier to use a spreadsheet.
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For 4 sheep, duck eggs and bees why on earth do you need an accountant. The profit, if any that you make will pay his bill.
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I quite agree. I'm happy to send you a sample spreadsheet if it will help.
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oops, I see you've misunderstood me ???, are you aware that if you and your partner (for example) are running the SH then one of you can work also and any losses can be off set against their PAYE, so in my situation my OH is quite well paid so in the first year our losses on setup will be declared against his PAYE so he pays less tax. So although Im happy to do a tax return for simple earnings, once you start off setting against another income then it becomes tricky. Also you can volunteer to VATregister which means you get the VAT back on your purchases, also means you have to charge it on sales but as I wont be doing much of that in the first year I will worry about that later.
Also you can go back three years on expenditure?
So that's why I need an accountant and perhaps some of you might too! :thinking:
Thank you for the info re the gateway courses- sadly I think our start up business advisers were a victim of the ressession however I will look and see what is online.
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I went to Business Gateway for startup courses and they brought HMRC staff in to run the tax and VAT related ones and all free of charge so even if you're not covered by BG then look at the HMRC as the best source of info on tax and VAT registration pros and cons. I didn't go the VAT route after speaking to them, and I don't have an earning spouse/partner to offset returns but they did Q&A for any circs that attendees raised aswell as the basics and I found them pretty good, other than the thing about separate business banking which proved a costly mistake after the 2 year free intro period with charges on everything, and the hassle meantime when I think it is more for retail and higher turnover businesses than the average smallholding startup - get your 2 years free banking when it will be worthwhile, if at all.
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thanks Ellied, that's helpful.
I had a business account for a previous undertaking and that proved troublesome when my business was running down so I think I will avoid another. Will check out HMRC ta :)
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Hi Brigadier
It would be interesting to know where you got the possible VAT rebate information from and also the PAYE info?
As far I have managed to find out. Famers/smallholders do not get VAT refunded nor can you offset any start up costs for a smalholding as it is considered a 'hobby farm' by the tax man. 4 sheep, bees and ducks hardly constitute a business? If it does then I will ring HMRC tomorrow! Oh and by the way It will probably cost you more to shear the sheep than what you will get for the wool.
best of luck
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Re: VAT. I had a meeting with a lovely VAT man today who authorised our first repayment! We turn over about £15k a year and he didn't ask any questions about the profitability or income derived from the farm, he just enjoyed looking at spreadsheets and receipts.
Was VAT registration worth it?
Probably: we claimed quite a lot back from the early days when we spent a lot of fencing, tractor, animal housing etc. Now we've settled down a bit and most of our expenses are things like animal feed that are zero-rated anyway so its becoming less worth it as we only reclaim about £300 per year.
Re: bank accounts - as a not-for-profit we get free banking via the Coop and I make sure everything possible goes through the bank so that my accounts are pretty simple - its more or less just a question of downloading statements and sticking them into the right spreadsheet.
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Hi Benkt,
thanks for that- I don't appear to be talking out of my backside then ;D
Herdygirl- I have found this article that would seem to support what Ive been trying to find out, maybe you do need to ring HMRC :thumbsup:
http://www.countrysmallholding.com/features-special-reports-a-taxing-issue--237811 (http://www.countrysmallholding.com/features-special-reports-a-taxing-issue--237811)
As for sheering costing more than the wool, my sheep naturally shed so its more a process of collection, which is scheap cheap as I pick it up!
Anyhow Ive had some really constructive helpful responses to my genuine question so thank you to the people who have not scoffed at my simple request for advice.
But ultimately I'm aware it is really tricky these days to make a profit off the land, as a smallholder my main aim is to put my land to good use to support my lifestyle of living in the country and having horses, and enjoying caring for the animals and practicing country pursuits, but I want to use the cost of doing this in the most efficient way and perhaps get a little of the hard earned back from the IR, if people want to scoff then so be it!
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I can't see that anyone scoffed at you.
You asked a question and you got some answers, if you had explained properly in the initial post what you needed to know the answers would have been different.
I don't think a first post should end with you criticizing the people you asked for help.
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no ones scoffing you.
iv done my own accounts for years so am aware that you can offset a unprofitable business against other income. I am sure you can also run a vat-reg as unprofitable for a certain amount of time before they have a hissy fit - giving you time to get vat costs back.
try an accountant who specialises in farming, there are plenty around my area.
good luck
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We thought about going down this route, but in the end decided not to bother.
Yes, we lost out on some reclaimed VAT etc, but we did save an awful lot of hassle in setting up as a business, doing accounts, submitting VAT returns etc. What swung it for us was the realisation that every time we fried an egg, we'd have to declare it as a benefit in kind! ;D
So, our smallholding is just a hobby, and makes no money at all. I'm therefore clinging onto the hope that if we were ever challenged, we'd be able to point out that our expenditure vastly outweighs our income, and thus we owe no tax to anybody (our only income is a bit of field rent and a few egg and meat sales to friends).
I'd be interested to learn what others do though?
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Thanks Shygirl, I didnt think you were scoffing at all. :)
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Tax office told me 8 years ago that I could not offset the loss on startup of my self employment against the tax from a previous full time job. I therefore can't see how you can offset a loss on a private business against a salary from full time employment -so maybe you do need a good accountant?
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In principle what you are suggesting does work and is worth doing for a legitimate business. But for 4 sheep, ducks and bees there will not be enough of a loss to make it worth while. I'm not sure HMRC will deem that a business either. One of your posts mentions horses. I wouldn't even contemplate putting any of their expenses through unless they are part of a business. The tax office is wise to it all and they are your mortal enemy when they suspect they are funding a lifestyle rather than a business. You definitely need a good accountant if you are going down that route.
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I wasn't scoffing at you Brigadier, I have seen a similar article and when i mentioned it to HMRC3 years ago, the lovely chap i was speaking to said,thats all very well, but you have a 'hobby' farm. (64 breeding ewes, 40 chickens, hay and lamb,breeding stock and eggs sales, 45 acres).
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I wasn't scoffing at you Brigadier, I have seen a similar article and when i mentioned it to HMRC3 years ago, the lovely chap i was speaking to said,thats all very well, but you have a 'hobby' farm. (64 breeding ewes, 40 chickens, hay and lamb,breeding stock and eggs sales, 45 acres).
I wouldn't call that a hobby farm - you should have got him to shear them all and then say if it was work or a hobby :roflanim: :roflanim: :roflanim:
I wonder how they class a working farm - by taxable profit? if so how much?
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I have no idea Shygirl, i was too tired to ask :tired:
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Going slightly off topic, but I find the Cash Flow Manager package very helpful to keep track of things - seeing how different strands of the business compare and so on, and easily allocating any private expenditure. It also does that VAT return for me, which is helpful. Obviously everyone's situation is different, but for us, it is well worth being VAT registered. Pretty much all we sell is lamb/sheep which we don't charge VAT on, but we can reclaim the VAT on anything farm related on which it is charged - protective clothing, tools, vet bills, medicines, as well as 70% of the VAT on the household utilities, and the VAT on things (wormers, worm counts, hoof trimming etc) for the two ponies I use for shepherding.
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Tax office told me 8 years ago that I could not offset the loss on startup of my self employment against the tax from a previous full time job. I therefore can't see how you can offset a loss on a private business against a salary from full time employment -so maybe you do need a good accountant?
The offset is against the current PAYE of my partner not of my previous employment. And yes this can be done as long as we are joint partners in the venture.
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A very interesting thread, and as a wannabee I have learned a lot :) Thank you. :-*
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In principle what you are suggesting does work and is worth doing for a legitimate business. But for 4 sheep, ducks and bees there will not be enough of a loss to make it worth while. I'm not sure HMRC will deem that a business either. One of your posts mentions horses. I wouldn't even contemplate putting any of their expenses through unless they are part of a business. The tax office is wise to it all and they are your mortal enemy when they suspect they are funding a lifestyle rather than a business. You definitely need a good accountant if you are going down that route.
We all work to fund a lifestyle. Of course I wouldn't dream of putting anything' leisure horse' related through the small holding business- that's illegal and fraudulent.
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Don't forget to keep a note of every mile you drive on business-related matters, preferably supported by a receipt, animal movement licence or similar. If this is a fair proportion of your overall mileage you can then claim for a similar proportion of the car running costs and insurance. Similarly, if you're using an area of the house as an office and have bills from a previous year when you were working for an employer away from the house which you can compare with the current situation, it would be reasonable to consider putting any additional electricity and heating costs down to business expense.
If you need to get a dog to guard your smallholding it may also be reasonable to consider its feed and vet bills as a business expense.
If you have start-up costs such as farm equipment it's probably worth registering for VAT, claiming it back then deregistering (providedyour income is under the threshold) once you produce anything you have to charge VAT on.
There's no reason to pay more tax than you have to!
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Don't forget to keep a note of every mile you drive on business-related matters, preferably supported by a receipt, animal movement licence or similar. If this is a fair proportion of your overall mileage you can then claim for a similar proportion of the car running costs and insurance. Similarly, if you're using an area of the house as an office and have bills from a previous year when you were working for an employer away from the house which you can compare with the current situation, it would be reasonable to consider putting any additional electricity and heating costs down to business expense.
If you need to get a dog to guard your smallholding it may also be reasonable to consider its feed and vet bills as a business expense.
If you have start-up costs such as farm equipment it's probably worth registering for VAT, claiming it back then deregistering (providedyour income is under the threshold) once you produce anything you have to charge VAT on.
There's no reason to pay more tax than you have to!
thank you so much- really constructive. I would never have thought about the dog aspect and Im thinking of adapting one of my sheds into an outdoor office, along the lines you have suggested the cost and maintenance for this can be included also. cheers