[Mickey]

Shot in the dark this one :-)  Our smallholding is just starting up and naturally we have a few upcoming expenses, eg. machinery, feed etc. A friend has suggested that we should register as a business so that we may claim the vat back from items purchased for the 'business'.  He tells me that it is not necessary to make a profit as many do not. 

I have no experience of this but am wondering us anyone does operate as a business and if so, do you have any thoughts/suggestions and/or advice?

We're not looking to do anything that would be wrong, the idea of registering as a business seems a little odd but is it something smallholders do?

Many thanks,
Mickey

[Penninehillbilly]

We had to register as a business when we had trees planted, all about registering with the RPA, last year we decided to go VAT registered. You don't have to rush into it, you can go back 4 years, i drew a good amount back after fencing, vehicle etc.
I'm unlikely to make a profit in the short term, mainly selling for breeding, and it's a pain trying to find all the receipts,  but seems worth it so far.
There is no VAT on feed, but worth booking down so if you do make a profit, it would reduce any tax bill.
On the hmrc Web site there is a document on claiming VAT in agriculture, etc.
It did seem quite complicated to me to register, i think the RPA application was about 10 pages.
How much land do you have?

[Womble]

The question is, ARE you intending to run as a business?  If you are going to be trading with the intention of making a profit then yes, why wouldn't you register. If you're not (e.g. if everything's going to be for your own consumption, or any profits are simply incidental to a hobby), then no you shouldn't.


Whatever you do, keep records *as if* you were going to be trading. We didn't, because we had too many other things on our plate, and didn't expect to be registering as a business. As a result, once things changed and we DID register, we were unable to go back and claim significant expenses that we would technically have been able to.

[Mickey]

Many thanks.  We have 22 acres of which 8 are woodland, includes a plantation of older fir trees that a guy from the forestry suggested we could sell onto a timber yard for fencing etc.  We're not intending to make a profit as such, perhaps in the future that may occur but we are more looking at the lifestyle and opportunity to care for some animals.

In the process I expect that we will sell on some stock plus we have a large area mapped out for the allotment which may progress to selling veg, fruit and eggs etc as we get passers by, again not so much as a business at this moment in time.

[Mickey]

We had to register as a business when we had trees planted, all about registering with the RPA, last year we decided to go VAT registered.

I am expecting to be replacing a lot of trees that have fallen over the years and left gaps in the wooded area and along the core path through the property.  The track was once a lovely avenue of trees planted along the route to a large house that burnt down in the 1800's. 

[hughesy]

If you're selling what you produce how can it not be a business? It might not be profitable and you might get your income from other work but HMRC will see it as a business.

[Factotum]

We registered as a business & for VAT when we started out with cattle.

It took 3 years from buying a bulling heifer to having the first beef to sell - the taxman understands such things.

As long as you are selling items produced on your land - be it timber, eggs, chickens or veg from the allotment, the taxman will be content. A small amount of profit will make him very happy indeed...

It makes a lot of sense to register for VAT - with us all of our produce (hay, beef and livestock) is zero rated so we don't owe the VAT money, but everything we buy for the farm that is VAT rated we claim back the VAT. So we get more money back from the VATman than we give to him. Helps a bit.

Keep all your receipts - if you still have the goods you can claim back the VAT for up to 4 years before you register. That's only allowed if you still have the items. As an example we claimed for tools (chainsaw, extra spanners, gate hooks, monkey strainer etc) that we had bought before we registered, but couldn't claim for the fuel to run the chainsaw as it had all been used

Lots of info on the HMRC site here : https://www.gov.uk/vat-registration/purchases-made-before-registration

Sue

[bazzais]

If you are 'trading' you will either have to register as self employed or as a Ltd business - both of which can register for VAT.

You have to register 'trading', at the very latest, by 5th October in your business’s second tax year of trading.

Dont forget that once you are on the radar you will have to prepare accounts - such as your income, outgoings for the sole tradership - you will also have to work out your own NI contributions and income tax.

If you are a Ltd company you will also have todo company accounts as well as your own payroll (NI and income tax) - you can do VAT you can do this monthly, quarterly or yearly (for a small turnover)

And dont forget - if you are constantly making a loss - they can flag your business as a 'lifestyle business' - ie your only VAT registered to get refunds - they will ask questions.
 

[Mickey]

Many thanks for the great advice,
Mickey

[cloddopper]

You used to be able to get an FOC .  face to face with HMRC wrt.  going self employed or setting up a small Ltd business. Same goes with theh bank that you will use .

 Both of them have a lot of current sound advice ... it used to be that the banks had a finger in the EU business enterprise trusts and as a result you could attend some of their seminars  that did 3 hrs one day a week for six weeks . At the end of these  session if you produced a sensible business plan that passed musted via some Seconded  bank manager types you'd often be able to get pound for pound match funding .

 As a consequence of our attending one of these six week  business enterprise seminars and  our attending an FOC three day event VAT workshop we set up an easy to use filing & storage system .

Like has been said already , write a simple cash in / cash out log book and get in the habit of filling it in every day straight after evening meal , giving all out going receipts a red ink and all incomings a black ink reference number tied to the  entry in your cash books . You can get simple four column accounting exercise type books from WH SMITHS etc .

I also offer that you keep a vehicle log in you car .... showing tax ,insurance ,fuel &, servicing costs ,  work out the initial value of the vehicle & do daily mileage related to your business idea .  For you may later on want to have all the vehicle finances  taken as business expenditure .

If you decide to use a computer for your records  make sure it  is backed up very regular & that the security system is a good one that works .. HMRC does not  accept the excuse of , " All my records were lost when the computer crashed  neither do they like to accept lost  receipts etc. "

Keep a triplicate invoice book handy ,  ours was in the car & taken with us when we were out and about for you never know when you'll see something that you want for your business..  This is so you can write out a cost for which no receipt is easily available such as  car washing , taxi fares or other out of pocket costs such as for prolonged  time away from you home when you have to eat at extra cost to that of your home made food . If some thing has a cost to you  our Business Enterprise Trust mentor said , " Always get a receipt , even I you have to write it  & sign it yourself .

 One thing we did learn to do was combine all our personal events with business events & travel where possible .
For the taxman  is happy for you to travel to a place  30 miles away for business and for you to interrupt the journey for shopping or a cinema or even days away so long as you don't cheat and add extra non business mileage etc.
 Had a few good  totally above board holidays tacked on to the end of business trips abroad  that way .

 Another thing we found very valuable was to buy 14 of the translucent  12 litre  plastic storage boxes that have blue clip down handles on the lids from the likes of OFFICE WORLD ..  These are for putting the  weeks receipts in then at the end of  month without fail or excuse  do an hours reconciling in the cash book etc and then  putting the receipts in a vacuum pack heat sealed bags and storing them  in a month by month  box . . The spare boxes were just in case we over filled a box in a month , like we did in the early years. All boxes had a month & year  label stuck on it

 At the end of the year these smaller boxes were decanted into a deeper clip down box  of 20 litres (?) that was marked with the from ... to... year .

We had 8 of these bigger boxes so we can comply with the HMRC requirement of keeping 7 years worth of records . We also had another three of these bigger boxes for things like warranties  & other legal documents such a planning application  or  planning consent and all our official correspondence to & from all manner of  people who could advance or thwart our plans.

 I think inmost cases you  won't be able to claim  back the VAT  if you are actually trading prior to you  making some form of official registration to trade  so  get your thinking cap on as to how far you can go without registering to trade.

 I seem to recall that we had a personal visit to our intended place of business from the Enterprise trust folk and one from the VAT lady. Not only was this to satisfy them that we were real people with land and planning permissions etc but we were also able to have the vital one to ones that are so helpful in setting up a small business.

It worked well for us , we were advised to  keep records & receipts which could be claimable leading up to us announcing intention to trade but hold back on the  buying of buildings   & equipment , register for VAT and then proceed.  It gave us back a lot of money in the first five years and then after that a reduced amount each year , but it was still worthwhile  to be VAT registered and do an hour or so of detailed records each week .

We set up a special IF account  and set up a lot of jam jars .. one beig the VAT liable .. money was put in it when it became liable and strictly left there till we had to settle yo with HMRC . None of this robbing Peter top pay Paul , for it is the downfall of so many would be businesses.

 The bank was great they gave us free banking for a year and also a free CD for a full small business Sage accounting & stock control system which was a god send once we'd set it up for the business.
There may be freebies like this available from your bank .

 One last thing  that may still apply to people newly thinking of starting up a small business .  Keep a record & all invoices etc of all the domicile incurred bills  such as rates & energy , for you used to be able to claim 1/5 th of the costs as office  costs if you were running the business of the kitchen table so to speak .
 
You might also benefit from looking up the clothing & personal equipment  costs allowance rules as well , for they often have a claimable content if they can be / are  only used in a work situation & not as every day wear .

 Looking for & buying approved safety gear such as footwear also a way of getting VAT off  boots & wellies if they have a specific safety element inbuilt in them .

[bazzais]

The thing is - getting any information, from anyone, that you then act on will require your signature - so if its wrong, no-matter how professional the information you have paid for.  You will bear the brunt if it goes wrong.