[Creagan]

Does anybody on here run their croft as a registered business?
Just thinking it could be quite beneficial as I want to put up a fair bit of fencing etc, and could save a bit in VAT.
I don't currently have any stock so am not selling anything, but it's almost literally a chicken-and-egg situation. Would HMRC be OK with this? If I end up not actually selling anything- which is a possibility- will they come down on me like a ton of bricks?

[Treud na Mara]

As I understand this you don't have to be a successful business, but for instance if you want to register for the new equivalent of the single farm payment, you have to get a business reference number.  But for this you must be undertaking some sort of agricultural activity. This can then potentially unlock various other forms of grant. And you don't have to be VAT registered for that either. Look up Rural payments for more info.

[Hamish Crofter]

My croft is run as a business, I'm a limited company and VAT registered. However I do some consultancy work overseas the earnings of which go into this limited company. The benefit is that everything I buy for the croft I get the VAT back, including my truck and diesel, HMRC are fine with it. Many of the things you would sell from the croft are VAT free anyway so you wouldn't have to charge VAT on them. The reality is at present my croft makes nothing as we are only just setting it up having bought it a year or so ago.
If you are going to do this get an accountant they are worth every penny and are not too expensive. You actually offset their costs against your tax anyway. The nuisance with VAT is the you have to do the returns evey 3 months but again the accountant will do this if you want with minimum record keeping by yourself.
With regard to the croft business reference number, when I applied and got mine I was never asked if I was actually a business.
Hope this helps.

[Rosemary]

Best bit about the VAT is the cheque they send me every quarter 

[Creagan]

Thanks for the replies.
It would certainly be interesting to see how far I could go with buying/using things in the name of the croft business. I wouldn't want to be doing anything dodgy of course, but the idea of buying things like trailers, ATV, fencing etc VAT free is very appealing.
Has anybody had any difficulties with things not being accepted as legitimate business expenses? Or does your accountant stop these before they become issues? Thinking, for example, about buying a small van which would be both a business and personal vehicle.

[doganjo]

Get a good accountant - we're worth it   

[Womble]

Thinking, for example, about buying a small van which would be both a business and personal vehicle.

That's fine. You have a choice of claiming 45p for every business mile, OR a proportion of the total expenses of the van in proportion to the % of the use that was for the business. One thing to watch is that you can't change from one basis to the other unless you change the vehicle. Also it seems to be easier to set up in business first before you buy the van.

One question for those who have done it before: What about stock fences?  My accountant thinks they may not qualify for capital allowances, as they're fixed in the ground. If so, I'm not too sure how to go about recording them as business expenses?

By the way, there was a useful article in Country Smallholding about this sort of stuff a while ago.

[benkt]

Our community farm is a company limited by guarantee and we claimed back a lot from VAT in our first year when building a lot of the infrastructure. Before any big cheques got sent out I had a visit from the VAT man who spent a morning looking at the receipts before approving the whole thing and we've had no problem since. It seems reasonable they check, as otherwise its a fairly simple scam to claim to run a non-existent agricultural business that charges no VAT on sales but claims back VAT on purchases and just receives a cheque from HMRC every quarter!