Livery services gain from VAT rating change
MANY farmers offering a livery service could be better off following a change in VAT rating.
A VAT Tribunal decision has resulted in Customs & Excise now accepting that where the provision of stabling and/or loose boxes is the main element of a livery service, then the income received is exempt from VAT. This change is effective from Jan 1 and is mandatory on all livery providers.
Customs & Excise has also agreed to consider claims for tax overpaid in the past.
"This is an important change of tack by Customs and essentially turns their old policy on its head. In the past they thought VAT was due on everything," says Carlton Collister of accountant Grant Thornton.
"Businesses that have been accounting for VAT on this income may be able to reclaim tax paid in the previous three years."
However, the statement explaining the new position is far from clear, he adds.
"For some, exemption will be a double-edged sword – potentially requiring them to repay some or all of the VAT they have reclaimed on developing or improving stables."
"At the same time, refunds of tax are not guaranteed. VAT reclaimed on expenditure may be off-set against VAT accounted for on income while Customs can always refuse a claim if they think the claimant will be unjustly enriched.
"And claims will be capped to tax overpaid in the three years prior to the date of claim, so any delay could reduce the amount due." *