Agri Vehicles Insurance from Greenlands

Author Topic: VAT registration  (Read 295 times)

Massey3075

  • Joined Jun 2020
VAT registration
« on: June 28, 2020, 11:12:10 pm »
Evening all.

It seems to be a well discussed area on registering my smallholding business for vat.

We’ve been in our small holding for 3.5 years now. Predominantly we are selling a very small amount of meat and eggs at the gate, but he rest is hay / haylage from our grass which is zero rated. I’ve spent reasonable amount of money on fencing and tractor/machinery which I haven’t claimed vat back for, which amounts to a reasonable amount.

Going forward the majority of inputs like machinery, and fertiliser is vat qualifying, but the hay etc is zero rated. Is this likely to cause a problem that I am claiming vat back but not much leaving the gate with vat charged ?

Thanks in advance - this is a great forum.

Neil

doganjo

  • Joined Aug 2012
  • Clackmannanshire
  • Qui? Moi?
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Re: VAT registration
« Reply #1 on: June 29, 2020, 11:33:32 am »
If you are selling VAT rated goods you must report them.  Food is zero rated so it is still reported albeit with no VAT being due.  It's not a matter of whether VAT is being charged or not.

If an item is VAT- able at the standard rate that amount is payable to HMRC, if it is Zero rated no VAT is payable but both must be reported. 

If you buy or sell an exempt item you should still record the transaction in your general business accounts.

Does that help?
Always have been, always will be, a WYSIWYG - black is black, white is white - no grey in my life! But I'm mellowing in my old age

Massey3075

  • Joined Jun 2020
Re: VAT registration
« Reply #2 on: June 29, 2020, 12:00:24 pm »
Yes it does. It more of a question about going vat registered, that it is likely more vat will be claimed From vattable inputs as opposed to zero rated vat at the gate.

I just wanted to hear that this would be ok and not a problem.

Womble

  • Joined Mar 2009
  • Stirlingshire, Central Scotland
Re: VAT registration
« Reply #3 on: June 29, 2020, 12:29:36 pm »
Farms are expected to be net-reclaimers of VAT because most of what they sell is zero rated, so I don't think that's an issue.


What I've never found a satisfactory answer to is whether you can continue to reclaim VAT long-term on a business that doesn't make a profit. Any ideas folks?
"All fungi are edible. Some fungi are only edible once." -Terry Pratchett

Anke

  • Joined Dec 2009
  • St Boswells, Scottish Borders
Re: VAT registration
« Reply #4 on: June 29, 2020, 12:43:09 pm »


What I've never found a satisfactory answer to is whether you can continue to reclaim VAT long-term on a business that doesn't make a profit. Any ideas folks?


I don't think so, local guy running a wee plant nursery was shut down a few years ago... we decided early on not worth the hassle, and I think it saved my sanity. We now sell very little, and I have never registered the holding as a business.

Womble

  • Joined Mar 2009
  • Stirlingshire, Central Scotland
Re: VAT registration
« Reply #5 on: June 29, 2020, 01:07:22 pm »
The thing is, if you de-register for VAT, most of your costs go up by 20% overnight. We actually did make a small profit last year, but that would have been wiped out completely if we hadn't been able to reclaim VAT on vet bills etc.
"All fungi are edible. Some fungi are only edible once." -Terry Pratchett

Anke

  • Joined Dec 2009
  • St Boswells, Scottish Borders
Re: VAT registration
« Reply #6 on: June 29, 2020, 01:36:32 pm »
The thing is, if you de-register for VAT, most of your costs go up by 20% overnight. We actually did make a small profit last year, but that would have been wiped out completely if we hadn't been able to reclaim VAT on vet bills etc.


Yes I know, but quite frankly, my sanity is worth more than worrying about a sudden VAT claim etc etc.


Massey3075

  • Joined Jun 2020
Re: VAT registration
« Reply #7 on: June 29, 2020, 10:45:19 pm »
Farms are expected to be net-reclaimers of VAT because most of what they sell is zero rated, so I don't think that's an issue.


What I've never found a satisfactory answer to is whether you can continue to reclaim VAT long-term on a business that doesn't make a profit. Any ideas folks?

I would guess a constant loss is not desirable to them, needs to be some form of profit occasionally over a 5 - 10 year period. Even the bank would be drawn to that one I’d imagine.

Womble

  • Joined Mar 2009
  • Stirlingshire, Central Scotland
Re: VAT registration
« Reply #8 on: June 29, 2020, 11:01:17 pm »
OK, but seriously, why?

@Anke - why was the plant nursery shut down for instance?

The bank isn't going to be bothered, as nothing is overdrawn. It's just that the business owes its owners money that it can't pay back. It's owners can therefore decide to fold, or can decide to keep on going because it's a lifestyle choice.

The choices as I understand them are therefore:

a) Find a way to make a profit (if you can, and are prepared to put in the extra effort for meagre reward!)
b) Carry on as a VAT registered but loss making business (this is the one I'm not sure about)
c) De-register for VAT (perfectly legal, but pushes up costs)
d) Stop trading completely (boooo!)
e) Stop trading as a business, but carry on as a hobby only (even though there might not be a profit, that one looks mighty fishy to me, since even though we might not make any money, we would still have a significant turnover).

Can anybody advise on the legalities of b) and e) then?
"All fungi are edible. Some fungi are only edible once." -Terry Pratchett

Anke

  • Joined Dec 2009
  • St Boswells, Scottish Borders
Re: VAT registration
« Reply #9 on: June 30, 2020, 07:05:22 am »
All I heard that he was shut down by the VAT people, and I am pretty certain profits in a small plant nursery were very slim... he had been there a few years, so it may have been more than one reason...

ZacB

  • Joined Apr 2012
  • Suffolk
Re: VAT registration
« Reply #10 on: June 30, 2020, 07:17:35 am »
Evening all.

It seems to be a well discussed area on registering my smallholding business for vat.

We’ve been in our small holding for 3.5 years now. Predominantly we are selling a very small amount of meat and eggs at the gate, but he rest is hay / haylage from our grass which is zero rated. I’ve spent reasonable amount of money on fencing and tractor/machinery which I haven’t claimed vat back for, which amounts to a reasonable amount.

Going forward the majority of inputs like machinery, and fertiliser is vat qualifying, but the hay etc is zero rated. Is this likely to cause a problem that I am claiming vat back but not much leaving the gate with vat charged ?

Thanks in advance - this is a great forum.

Neil


No it’s not an issue. The Vat we have reclaimed over the last three years is a considerable amount allowing us to put back into the business. If your business is run as a business with a view to making a profit (no matter how small) then to register is the best thing we’ve done. Simply accounts as a sole trader completing quarterly vat returns isn’t too onerous. From memory on initial registration you can go back 4 years but I’d seek advice on that point. Further to that it may be possible for losses to be written off against other income, again seek qualified advice, a slight digression from the Vat element. Both of these practices have allowed us to make our pennies go further & at some stage should turn a profit.

Womble

  • Joined Mar 2009
  • Stirlingshire, Central Scotland
Re: VAT registration
« Reply #11 on: June 30, 2020, 08:02:18 am »
Thanks Neil, that's a really useful post.


Anke - it's far more likely that the nurseryman was shut down for non-payment of VAT. Smallholdings are a bit of an anomaly, since they are usually net reclaimers of VAT. Most shops on the other hand will buy something for say £1 + VAT, so £1.20 and then sell it for £2+VAT, so £2.40. They'll then claim back the 20p they originally spent, and will owe the VAT man the other 20p. (At the risk of being totally patronising, that's 20% Tax on the Value they Added - sorry, can't figure out how to make that spell VAT!).

If a business hits tough times, it's easy to pocket the full £2.40, but all those 20ps soon add up, and at the end of the quarter, if you can't pay the VAT man....... :poo: :dunce: :coat:

I've currently got exactly this problem with my own self-employed business (not the smallholding). After a very lean year when I was mostly working outside that business, I've been absolutely flat out over the past quarter (yeah, I know!). However, the invoices I raised yesterday don't become due until the end of July or even August. The problem is that the VAT man wants his money on 7th August*, and there isn't currently enough cash in the business account to pay him. That means that if my clients are even a week late paying their bills, I'm in trouble.

It's been a very profitable quarter, but if I don't keep an eye on cashflow, I'll be toast, just like the nurseryman!!


* I'm describing the normal situation here, without any CV-19 dispensations.
"All fungi are edible. Some fungi are only edible once." -Terry Pratchett

Anke

  • Joined Dec 2009
  • St Boswells, Scottish Borders
Re: VAT registration
« Reply #12 on: June 30, 2020, 09:59:45 am »
Reading your post @Womble has just brought it up again: Actually I am just totally risk - and therefore business - averse, it took a few years for me to realise but even the thought of putting my house/holding at risk just paralyses me. End of story. I run my holding to produce food for us, I sell goats as breeding stock from time to time and if I have too many sheep about they go to market (and I don't freak out if they only make 30quid, as has happened recently, they did not cost me more than that to raise actually). I am lucky that my OH has an outside job that he loves more than farming, so we get by (and hopefully will continue to do so as he has just started to work again - phew). I would not be doing smallholding if we depended on an income from me.

doganjo

  • Joined Aug 2012
  • Clackmannanshire
  • Qui? Moi?
    • ABERDON GUNDOGS for work and show
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Re: VAT registration
« Reply #13 on: June 30, 2020, 05:01:02 pm »

If a business hits tough times, it's easy to pocket the full £2.40, but all those 20ps soon add up, and at the end of the quarter, if you can't pay the VAT man....... :poo: :dunce: :coat:

I've currently got exactly this problem with my own self-employed business (not the smallholding). After a very lean year when I was mostly working outside that business, I've been absolutely flat out over the past quarter (yeah, I know!). However, the invoices I raised yesterday don't become due until the end of July or even August. The problem is that the VAT man wants his money on 7th August*, and there isn't currently enough cash in the business account to pay him. That means that if my clients are even a week late paying their bills, I'm in trouble.

It's been a very profitable quarter, but if I don't keep an eye on cashflow, I'll be toast, just like the nurseryman!!
*
If before your VAT becomes due you contact HMRC, you can agree a payment plan with them.  They are usually amenable, and will be more so with Covid in the mix.

I'm not totally au fait with current tax and VAT regulations but it used to be that HMRC expected a new business to be in profit by at least the fifth full year of trading

Ouch I twisted there, and it hurt - I've done my back in. So no gardening today and it's the only dry day this week dammit

Guess I'll just watch the birds imstead.  Hope I can bend to collect the eggs later on  :'( :'(
« Last Edit: June 30, 2020, 05:02:34 pm by doganjo »
Always have been, always will be, a WYSIWYG - black is black, white is white - no grey in my life! But I'm mellowing in my old age

 

VAT registration

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