Value Added Tax (VAT) is complex and no less so for farming businesses.

Where expenditure is incurred on repairs, for example, relating specifically to the farmhouse, there is often confusion about whether any VAT can be reclaimed and, if so, how much.

Some business owners will try to claim 100 per cent, whilst others will not claim anything – both of which are incorrect.

More often than not, farmhouses are used for both private and business purposes – i.e. as a home, but also as the farm ‘office’. Consequently, any expenditure should be assumed to have a business and a private element to it; hence, ultimately, a proportion of the VAT should be recoverable through the farm’s VAT registration.

To eliminate ambiguity, the National Farmers Union (NFU) agreed standard apportionments with HM Revenue & Customs (HMRC) a number of years ago.

As per HMRC’s guidance, providing that the building is a typical working farmhouse, the business is a full time farming activity and the work done is in the nature of repair and maintenance of the farmhouse, up to 70 per cent of the VAT may be recovered.

Where farming is a part-time activity, the farmhouse is primarily the family home, or where work done is an extension or alteration of the farmhouse, HMRC will consider the claim on its individual merit.

Our tax advisers have the knowledge and experience to help you to identify any beneficial VAT schemes that you are eligible for, to minimise your liability through careful tax planning and to ensure that you avoid making costly mistakes. Contact us today.

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