Down on the farm
Suppose you run a VAT-registered business, but you have a small sideline that brings in a bit of extra income. If you are the owner of both, they both fall under the same registration, and you have to charge VAT even on the small takings of the second business. If a different person runs the second one – maybe a husband or wife, or a company – then it can fall below the registration threshold and be VAT-free.
The trouble is that HMRC don’t like it. They may look closely at the businesses and argue that you really run them as one. Or they may accept that they are separate, but argue that they have been ‘artificially split’. If they are closely linked together financially, organisationally and economically, HMRC can register them as if they were a partnership and make you charge VAT on everything in future.
It’s rumoured that HMRC have been engaged in a campaign against farmhouse B&B operations, where the farm is VAT-registered in the name of the husband or a partnership, and the wife runs the accommodation with a turnover below £73,000. In a recent case, the Tribunal threw out HMRC’s ruling that they had been artificially split – but only because the officer had not recorded a clear reason for the decision in his notes. He could still go back and try again.
If you have different activities and wonder if they all should be subject to VAT, we will be happy to advise you.
