Many farms and estates make extra income in the Christmas period with short-term activities either directly for their own business or by letting land or buildings to other operators.
These might include:
- Letting land for seasonal attractions.
- Staging Christmas markets, gift fairs and similar.
- Sale of Christmas trees and holly.
- Charging a rent to another operator for the sale of Christmas trees from their land.
- Sale of logs.
- Staging special events such as a concert or charging rent to a third party to do this.
Sally Appleton, a partner at Saffery Champness and a member of the firm’s Landed Estates & Rural Business Group, comments:
“Any income from such additional activities must be reported and included on a tax return, and any non-declaration or under-reporting could impact on the inheritance tax status of the business as well as reducing the opportunity to pay pension contributions.
“Correct VAT reporting is also crucial, with VAT on sales being properly accounted for.
“Temporary staff taken onto the payroll over the Christmas period, even if for just a few days and regardless of how they are paid, will be subject to normal PAYE rules and Real Time Information (RTI) reporting.”
Where a farmer or landowner makes an arrangement with a third party for use of ground or buildings the following should be considered:
- Is extent of their involvement simply that of receiving rental income for the use of the land?
- Is VAT chargeable for that use? For example, where land has been ‘opted to tax’ and is then let to a third party for a commercial venture the operator must pay VAT on the fee for the use of the land.
- Is VAT recoverable on any related costs incurred?
- How will income be taxed in the hands of the recipient?
- Might such events impact on Agricultural Property Relief (APR) that would otherwise be available for inheritance tax purposes?
It should be noted too that a precedent was set for VAT being due on the hire of pitches at organised events in the 2016 Craft Carnival case. This clarified that such activity went beyond simply being granted a license to occupy land which would be VAT exempt.
