Down On The Farm
At Lewis & Co, we have longstanding relationships with a number of clients who are farmers and we’ve recently taken on more clients in this area. In fact, we even have some hand’s on experience we can call upon, as Barney Lewis – who founded Lewis & Co – has a farm himself.
As with many industry sectors, when it comes to HMRC and your tax reporting, a farm is much like any other business. However, there are two particular aspects to consider – grants/reliefs and the fact that, for tax purposes, you are required to make a profit at least every six years. In addition, there are VAT consequences, which differ depending on what you are selling from your particular farm.
A farming business may be able to benefit from both Agricultural Property Relief (APR) and Business Property Relief (BPR). APR is based on the agricultural value of property and could be either 100% or 50%, spending on the nature of tenancies in place and the rights a farmer has to the property.
BPR applies to relevant farming property and farming assets within the business and applies to the open market value of the assets. Again, it is available at either 100% or 50%. Here at Lewis & Co, we work with a farming expert locally, who is really helpful when it comes to helping our clients claim for any grants or reliefs they are entitled to.
The fact that a farm business has to make a profit at least every six years is not always common knowledge. This requirement actually falls under something called the ‘hobby farming rules’. These rules were introduced in the 1960s due to concerns over taxpayers farming for recreational purposes and not for commercial reasons. The original intention was to restrict loss relief in ‘extreme cases’, where the trading activities bore no relationship to the criteria of a commercial trade.
If farmers are concerned about showing a profit in the sixth year, this is where we, as accountants, can step in and help. Often farms are sitting on stocks – be that hay, for instance, or livestock – and it’s worth getting that valued. You would typically need a specialist valuer for this process.
The farming sector is ever-changing and we heard about that first-hand ourselves very recently, when we spent a lovely afternoon at Herbert Hall in Marden.
The original Herbert Hall came to Marden at the end of the 19th century and became a tenant farmer on a ten-acre site, where he grew hops, apples, pears and plums. He built a farm, which has remained in the Hall family for three generations. Then, in 2007, his great grandson, the winemaker, Nicholas Hall, planted a vineyard with Chardonnay, Pinot Noir and Pinot Meunier grapes.
Clients we look after have diversified in many other ways and some, for instance, rent out office buildings, barns or storage units to other businesses or perhaps offer holiday lets. There are special tax rules for rental income from properties that qualify as furnished holiday lettings (FHL) and we can support clients in that situation. We covered the tax implications of holiday lets in a recent blog: https://www.lewisandco.biz/were-all-going-on-a-summer-holiday/
Please do get in touch if you have any questions at all about farming or any associated businesses, such as holiday lets.