Many rural businesses may well have plans to make their land, farm or estate available for a Jubilee celebration or other summer event. Such activities, whether a modest gathering or major public event such as a festival, can provide a valuable additional income stream for the business, but there are various potential tax pitfalls to beware of in doing this.
“There is sometimes a misconception that the rules only apply to big venues, and major ‘big ticket’ events, but even those putting on something much less extravagant in a field or barn, for example, with only a relatively small number attending, need to consider the tax position. For example, there can be consequences for both inheritance tax and VAT and not taking these considerations into account at the time could prove to be costly in the future.
“Also, where certain criteria are met, the tax position of the individual who owns the land can be improved if they run the event themselves or enter into a joint venture with an event organiser.”
A tax check list for a farmer or landowner to consider before setting up or entering into an arrangement for an event is as follows:
- What is the landowner’s involvement – is it purely a rent received for the use of the land by a third party?
- Should VAT be charged on that use?
- Will VAT be recoverable on any related costs incurred with the event?
- How will income be taxed in the hands of the recipient?
- Does the occupation of the land for events (such as a garden party or festival) have an impact on Agricultural Property Relief (APR) that might otherwise be available for inheritance tax purposes?
The issue of VAT on the hire of pitches for stalls at organised events such as game fairs, rural shows and craft fairs was clarified a number of years ago with the decision from the Upper Tax Tribunal in the Craft Carnival case in favour of HM Revenue & Customs (HMRC). This set a precedent for VAT being due on the hire of pitches at organised events as this goes beyond simply a license to occupy land which would otherwise be VAT exempt.