Christmas brings lots of opportunities to generate extra income on farm but business owners need to be aware of the tax pitfalls.
Farms and estates looking to make some extra money from staging Christmas events must be aware of the tax pitfalls.
Christmas is a great time for making some extra income from activities such as letting land for seasonal attractions, staging a Christmas market, selling Christmas trees or other seasonal products and running events such as carol concerts.
But Sally Appleton, a partner with chartered accountant Saffery Champness, has warned businesses need to remember income from the activities should be declared and included in the appropriate section of a tax return.
She said: “Failing to declare such activity accurately could impact on the Inheritance Tax status of the business, or potentially reduce the opportunity to pay pension contributions.”
She added VAT status of seasonal activity was crucial.
“For example, a farmer selling Christmas trees will need to account for VAT on the sales price.
“Similarly, letting land which has been opted to tax to a third party for them to undertake a commercial venture will mean that the operator will need to pay VAT in addition to the agreed fee for the use of the land concerned.
“Seasonal activity can also require temporary staff, and any staff taken onto the payroll, even if for just a few days, and no matter how they are paid, will be subject to normal PAYE rules and Real Time Information reporting.”
Farmers or landowners making arrangements with a third party for use of their ground or buildings need to consider the extent of their own involvement in the use, whether VAT is chargeable for the use, if VAT would be recoverable on costs and how income will be taxed.
She added events such as Christmas fairs may have an impact on Agricultural Property Relief which would otherwise be available for Inheritance Tax purposes.