[xenedra]

I've just got planning permission to change 5 acres of agricultural land in front of my house to equestrian use, and build stables on it. Husband has looked at the bank account and said we're short £15K for what I had planned. Doh!
So being a business man, and knowing I've always wanted a smallholding he's suggested I set up a small holding business and get it VAT registered so I can claim back all the VAT from building the stables and essentially save a small fortune. Has anyone done this to offer some advice? I don't know where to start with all the legal bits to make sure it's legit. I assume I have to apply for a small holding number, register the business name and set up a business bank account. What about business rates? Are there any flaws to my plan and are there other tax breaks available with a small holding?

[Dan]

What will your business be? Will you be using the stables for a business purpose? If not, you can't claim back the VAT on any expenditure related to them.

If you do claim VAT on purchases that aren't related to your business (whatever it is) you'll run the risk of having to repay the VAT once it's discovered, and potentially face criminal proceedings (it's technically tax evasion).

[Womble]

Capital allowances for buildings are complicated, and you really need to get expert advice. I am not an accountant, but mine told me that repairs to existing buildings could be claimed as a business expense, whereas new ones couldn't. Hubby is right that if this were a new build house, you could reclaim the VAT. However, I'm really not sure about a new build stable.

As Dan says, for this to be a business, you have to be doing it with a view to making a profit. Obviously with your startup costs, you're going to make a loss to begin with, but you need to do some projections to see if you are going to be profitable after so many years. You don't say what you plan to do with your land to bring in income, but a good first step would be to do a business plan and see when (if!) you might start to make a profit, and go from there.

I read some tax case law a while back about an equestrian business, and the test they applied was something like "if this business continued to run in exactly the same way, would it ever be profitable". When the answer was clearly 'no', they were disallowed all tax breaks.

After that, I'd recommend you find a good local accountant (preferably a farm specialist), and have a chat with them. They'll be able to advise on the legalities and will be able to set up the business side of things, register you for VAT etc.

HTH!

[harmony]

What exactly is your planning for? To build stables so you can keep your own horses or run a livery yard? Five acres isn't huge and you are going to take up some of that for stables and presumably some sort of feed storage area. Trailer parking and if livery, owner parking.


Equestrian businesses are commercially taxed.


You don't get a number as a smallholding. As a business you register with HMRC and yes, you need a business bank account. Yes, you maybe able to claim back the VAT on start up costs but you will also need to charge VAT to your customers and then do a VAT return and pay anything you owe.


Not much of what you buy for horses has VAT on it.


The VAT threshold is £85,000 I think but you can register voluntarily and that isn't difficult. You can do it online but you will need to be registered for tax with HMRC first.


Seems to me you have a lot of planning to do.

[LouiseG]

Also equestrian use is not smallholding, I don't think. You would need to apply for change of use if you have other animals on it. Sorry.
We are voluntarily registered for VAT but it's a lot of hassle and are looking into de registering as a business and just becoming a hobby farm.
Lots of accountants will give you a free half hour consult for free to advise you on this sort of thing, it's worth seeking professional advice.

[DartmoorLiz]

OH went voluntarily VAT registered for a new business and we sincerely wish we had not because, while the VAT rules have not changed the way VAT people interpret them has.  We thought we'd get a lump sum for all the start up costs.  We did not.  I strongly suggest you get current financial advice and given you want the VAT people to pay you at least £15k its worth getting more than the free half hour which will probably be attended by the lowest paid assistant in the firm whose only knowledge may be the free leaflets they all print. 
It all sounds very exciting though, let us know how you get on.

[harmony]

Completely agree with others above. Specialist advice needed.

[bj_cardiff]

Change of use from Agri to Equine is one thing but you might need to apply to change it again from Equine to business if your runing it as a business. It'd be a big hassle to change it back and I assume you'd be paying business rates if it was registered as a business. It sounds a lot more of a hassle that its worth TBH..