As the pheasant shooting season opens this week, and whether you are thinking of making the shoot a commercial enterprise or reviewing the current set-up in light of continually changing tax rules, Martyn Dobinson, a partner in the Saffery Champness’ Landed Estates Group, has compiled some top tips for staying on the right side of HM Revenue & Customs (HMRC.)
When do you need to worry about HMRC?
Many small shoots are run as private affairs and are outside the scope of tax and VAT. However, tax needs to be considered once the shoot becomes commercial.
If a shoot is commercial, is set-up to run as a standalone business, and its income exceeds the current registration limit of £85,000, then it will need to be registered for VAT. If its income falls below the threshold then it may continue to be registered for VAT. If registered, then VAT should be recoverable on costs associated with running the operation. If run as part of another business which also makes supplies that are either exempt from VAT or outside the scope of VAT, then partial exemption can be an issue, and VAT recovery may be restricted on non-directly attributable overheads.
Care needs to be taken around expenses where a shoot syndicate is established. If set-up and run correctly, a syndicate does not necessarily constitute a business and therefore may be outside the scope of VAT.
If registered for VAT, the shoot will now fall under the digital reporting rules that have been in place since April 2019.
Tax on profits
Where operated as a sole trade or through a partnership, shoot profits will be subject to income tax as well as National Insurance contributions (NICs) at the appropriate rate. Where losses are made, and the shoot is operated commercially, then sideways loss relief may be available, subject to capping rules. If the shoot is an incorporated business then corporation tax will be due on profits.
Shoot employees and PAYE
Where those employed by the shoot are already on the payroll elsewhere in the same enterprise then PAYE systems will already be in place. Where casual staff are taken on by a shoot, then PAYE and real time reporting requirements will need to be met. Minimum wage rules and taxation and reporting of benefits-in-kind for staff, such as keepers’ accommodation for example, will also need to be considered.
Inheritance tax (IHT) relief
An ‘in-hand’ shoot operated commercially with a view to profit may qualify for Business Property Relief at 100%. If run as a private concern, or within a syndicate, then the land on which the shoot is operated will not qualify for IHT relief.
Martyn Dobinson comments: “There are, of course, lots of other points to consider such as promotion, pricing, cost control, staffing and game marketing, but for many, even a modest shoot can be a valuable asset for a farm or estate business. And for those with an already established shoot undertaking a periodic tax health check is always a sensible approach.”