[vin_rouge]

Hello from Simon and Caroline.  We have a small holding, by which I mean we have the smallest possible herd of cattle (...2).  But we have ambition and some knowledge of husbandry (i used to work on a rare breed farm 10 years ago.  We have some fantastic friends (about 5 miles away) who have around 80 beef steers and are helping us in terms of land, equipment etc.  We have no money to speak of for this, just enough to buy a cow every now and then, and vet bills when they come.

We have a couple of questions and wonder if anyone might be able to help.

I work as a self employed musician and music teacher.  My wife is at home with the kids (we homeschool them).  Given that we have outgoings at the moment, but no income for a year or so, what is the best business model for us at the moment?  It looks to us as though setting up a partnership would be tax efficient as I can offset expenditure against my personal tax as a musician.

Also, when does it make sense to register for VAT?  I have read posts on this on the in the AS 'Coffee room' but get a feeling that everyone is much bigger than we are.

Before you ask, we do have an outlet for our beef; selling it, in the quantities we are producing won't be a problem for a long time.

Any advice or tips to these or any other points would be very welcome.  We really want to make this work and want to be in it for the long term.

Cheers,
Simon

[Dan]

Also, when does it make sense to register for VAT?  I have read posts on this on the in the AS 'Coffee room' but get a feeling that everyone is much bigger than we are.

It's almost certainly worth you registering for VAT.

Basic foodstuffs (like beef) are zero rated, so you won't be charging your customers VAT, but being VAT registered means you can reclaim the VAT you pay on any business supplies, equipment and services.

Obviously there's an overhead in terms of administration - record-keeping and a quarterly return - but unless your time is fully occupied earning money in other ways it still makes economic sense.

How you organise your smallholding business alongside your music business probably needs the advise of an accountant who can see your books. If you wrap the two together into a single entity and register for VAT you'll have to start charging VAT to your music tuition clients, and paying that VAT back to the revenue, which may not be something you want to do.

Hope this helps. 

Dan

[Rosemary]

I agree with Dan but remember animal feed is also zero rated, although drugs, vets bills etc are standard rated, so if you're only buying feed you won't reclaim much.

However, if you are investing in equipment, fencing and other "capital" type items then you will be able to claim VAT back on them.

[doganjo]

You won't be able to combine smallholding with your music playing/teaching - HMRC will want two self assessment returns.  Some businesses are complementary and there are others can be tenuously grouped together - personal therapy/fear of birds/large animals with keeping these is one I can think of. 

The smallholding could be a partnership but you are unlikely to make a profit for some time if at all unless and until you expand considerably.  But I would be inclined to put it all in your wife's name though as she has no income and if there were any profits her personal allowance would cover it.  Your income would attract your own personal allowance and there is no married persons allowance now. Personal allowance for this year to 5th April 2012 is £7475 per person

You will know of course that ALL wholly related expenses are deductible from your sales, so only any net figure is subject to taxation. 

Hope that helps, but local tax officers are usually very approachable and helpful these days.

http://www.hmrc.gov.uk/selfemployed/index.shtml

Annie

[Anke]

I would be careful in registering for VAT - you will have to show a profit within five years of operation, if not you will be classed as a "hobby" and have to repay all the VAT... It depends on your business model and what capital outlays you have coming up.

[doganjo]

I would be careful in registering for VAT - you will have to show a profit within five years of operation, if not you will be classed as a "hobby" and have to repay all the VAT... It depends on your business model and what capital outlays you have coming up.

You can de-register prior to that happening though and no VAT is repayable.  And a small profit is acceptable

[bazzais]

Without any figures I'd have to echo the 'talk to an accountant'.

That said - It maybe worth Caroline also registering as self employed running 'that' part of your business as she can earn that tax free first amount and you can also remain in your present situation of doing own self assessments too.

The key thing I have experienced from accountancy is to keep things simple even if it does appear that sometimes there are better and more efficient ways to do things.

I would only recommend anyone registering for VAT unless its going to lessen their liability to pay it - if your not buying alot of VATable goods in comparison to what your selling and your under the turnover limit - why bother.

Baz