Beware farm events tax traps

Festivals and other public facing on-farm events need careful tax planning, warns Mike Harrison, a partner with accountant Saffery Champness.

In the rush to set up an event and the enthusiasm which can accompany the process, the tax implications are often overlooked.

The pitfalls most likely to be encountered are in Inheritance Tax (IHT) and VAT. Where events are successful and grow, the tax position can change in the background, so that something which was not an issue at the start can become a large and costly problem.

Important points for any farmer or landowner to consider before setting up or staging an event include:

  • 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 the use?

  • Will VAT be recoverable on any related costs incurred with the event?

  • How will income be taxed?

  • Does the occupation of land for an event such as a festival have an impact on its agricultural use which might remove the owner’s ability to claim relief for Inheritance Tax purposes?

Where land is let for events, agricultural property relief (APR) at 100% may be lost. However, where an event is run by the landowner or occupier him/herself or in a joint venture, then IHT relief will usually still be available.

See also: Better Business – eight top tips for farm tax planning

When the owner lets the agricultural land and an activity raises the land value, then IHT relief is only available on the agricultural value, with the remaining value attracting an IHT liability at 40%.

VAT can be a minefield and in some circumstances hosting events could limit a business owner’s ability to claim VAT back on their main trading activity.

Whatever the context, an early appraisal of the tax implications is essential.

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