[artscott]

This may be a bit premature as I have only been on my smallholding for 6 months and still got loads to do to get it productive.

Does anyone have advice on if it is worth registering as a business.  Both my wife and I work full time and pay tax.  we brought the place 3.5 acres + house and outbuilding so that we could provide home grown food for our family, and to get back into the countryside.  I gave no thought to working the place as a business, certainly not full time as I have been self employed before and didn't like it at all.

However since we collected our pigs and chickens some friends have expressed an interest in purchasing excess from us and another has suggested that if we ran the place as a business we could offset tax we pay from our main jobs against any losses/expenses we incur.  If this is the case we could make some investment in much needed equipment and get the place sorted much sooner. But I would like more information before I go down this route.

Registering VAT is another issue, although I'm not sure I can even consider this at the moment.
So if any of you have experience of running a small holding while working full time I would appreciate any advice you could offer.  And if anyone knows a reasonably priced accountant knowledgeable in this (Aberdeenshire area) I would be very grateful.

Angus

[chrismahon]

Self employment and full time employment are taxed independently Artscott. I've just completed my tax return. If it wasn't done that way everyone would be operating their garden at a business loss and funding the purchases from their employment tax. You can no longer buy stuff that you use at home and run it all through the business either. So I bought a saw bench to speed up reflooring and building bath framework, plus other stuff I do for a living. But I also use it to build chicken coops, so could only claim part of the cost against the business. Changed that last year and it was one of the main reasons for being self-employed -cheaper toys!

If you start selling stuff and ever get to the stage of profit you will need to register it as a business. Save all your receipts for purchases and keep a record of what you sell anyway. Just in case someone reports you for untaxed income and so you can prove it is loss making.

[robert waddell]

well Angus you could ask doganjo   aka Annie on here that is her profession
the tax incentives are not so good now for any business  there is not the same writting down allowance
registering for vat is not as straight forward as it once was   they want your money they don't want you claiming it back
claiming your paye back can be done but depends on a lot of things where you are what you do  your place of employment  and where you Cary out that employment       if you meet the criteria you could claim for previous years    but do not ask at the tax office they will rubber ear you

[benkt]

Its a difficult balance, registering for VAT is easy enough. We claim back the VAT on all our building/fencing stuff etc but our main expense is animal food which is zero-rated. The main downside in my opinion is the need to file accounts and other miscellaneous paperwork for the company. Round here you'll easily pay £1k to an accountant to sort out the accounts and file them for you. In which case, you'll need to be claiming back an awful lot of VAT to make it worthwhile.

[doganjo]

Its a difficult balance, registering for VAT is easy enough. We claim back the VAT on all our building/fencing stuff etc but our main expense is animal food which is zero-rated. The main downside in my opinion is the need to file accounts and other miscellaneous paperwork for the company. Round here you'll easily pay £1k to an accountant to sort out the accounts and file them for you. In which case, you'll need to be claiming back an awful lot of VAT to make it worthwhile.

If you read up online about using Excel for simple book keeping it isn't arduous.  Basically your personal allowance comes off what you earn and you pay tax on the rest.  You would have to register your smallholding as a business and keep strict records to have any chance of cl;aiming losses against your tax, and then only for a limited time - you'd be expected to be in profit fairly quickly.  VAT is a different ball game.  Very good records are required, especially if you are a net claimant, but then you should keep records in any case.  If you are not at the VAT threshold(in other words voluntary registration rather than compulsory because of level of turnover) they will probably want to have projected figures for the next three years.

My advice would be not run it as a business, if your friends and family need meat,  work out the value carefully without building in too much gain, ask them for a contribution to the food and vet bills and make sure it is documented as such, keep note of what you spend, and what your produce rates are so you know whether you are actually gaining by practising smallholding.
No need for an accountant if you are sensible and honest.

[Bramblecot]

Doganjo,  Are the tax rules the same in England and Scotland please?

[Rosemary]

Registering for VAT is of more use now than later as you can claim back the VAT on capital purchases like fencing and equipment. If you wait, running costs like animal feed are zero rated anyway so the benefits are fewer.

[doganjo]

Registering for VAT is of more use now than later as you can claim back the VAT on capital purchases like fencing and equipment. If you wait, running costs like animal feed are zero rated anyway so the benefits are fewer.

Haven't they clamped down on this now though? Asking fro a lot more detailed information before allowing voluntary registration?

A lot of people (including my late husband) were getting money back early on in the business as a net claimant,  then de-registering once they got to the level where they were no longer getting money back.  HMRC were losing a  lot of money. 

[benkt]

We registered voluntarily for VAT last autumn and it was just one form and no follow up questions.

[FiB]

We registered voluntarily for VAT last autumn and it was just one form and no follow up questions.

SO Benkt - do you then have to charge VAT on every thing you sell and does that makes it look expensive?  And have I left it too late to register/claim for 2011/12 does anyone know - we spent a lot on fencing materials etc but didnt sell anything... this year we will be selling eggs, meat and camping but not expecting that to amount to much...

[Crofterloon]

I have VAT registered my holding or should I say I got Leiper and Summers in the Broch
to did it for me, I also use them to do returns etc.
 
To date I have always made a loss basically because any surplus money is used for stock etc.
 
I get the accountant to do our personal returns and holding returns. I am not got the greatest
financial brain but I have had some losses put against personnal tax.
 
For me registering is the best thing. I bought a landrover got the VAT back etc although I really
only use it for sheep work.

[benkt]

Yes, it does mean I have to charge VAT on everything we sell. But it's all food which is zero rated so in the end it makes no difference. Actually we sell almost all of our produce by subscription to our members (we are a community farm) and I had a chat with HMRC  to confirm that we don't have to add vat to the subs since all they receive is zero rated food.

[bazzais]

You can use the flat rate VAT scheme - there is a section specially for 'farmers' - not sure if it applies to smallholders too, but it does look like its geared to the smallholder and not farmers who spend massive amounts on outgoing VAT for plant, equipment and tata around the farm but can charge little in return.

http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm#9

But if I were you - less paperwork is good paperwork.

Even HMRC will give you conflicting advise depending on who you talk too and what day - no matter what business you run - they dont even know the rules - hence they are employed and not self employed.

Once you start treating your smallholding as a business for tax reasons - they may start to as well.

In the end it could be classed as your 'second job' and the tax on earning in a second job is quite big too.

If you wanted to start a Ltd company with your land you would also have to either charge your Ltd company money to rent your assests or sell your personal assest to your business.

If I were you - earn your wage - earn a bit on the side with your produce.

[benkt]

Re: back dating VAT claims for  purchases made before you register: see
http://www.hmrc.gov.uk/vat/start/register/purchases-before.htm


Looks like purchases of  fence materials etc. should be able to have VAT reclaimed for up  to four years, assuming you still have the fence!