[Womble]

 
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! 
 
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?

[brigadier]

Thanks Shygirl, I didnt think you were scoffing at all.

[chrismahon]

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?

[moony]

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. 

[Herdygirl]

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).

[shygirl]

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 
I wonder how they class a working farm - by taxable profit? if so how much?

[Herdygirl]

I have no idea Shygirl, i was too tired to ask 

[mowhaugh]

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.

[brigadier]

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.

[benandjerry]

A very interesting thread, and as a wannabee I have learned a lot  Thank you. 

[brigadier]

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.

[Marches Farmer]

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!

[brigadier]

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