VAT on horse share?

[05jackd]

Please bare with me on this one.

Our accountant has suggested that we consider registering our smallholding for VAT. As we pay quite a lot in materials for upkeep/ vets etc it may be worth our while but I need to understand more first.

Incomewise - This would include the few foals that we sell per year which I believe do need VAT added as they do not qualify for the margin scheme.

Sheep and chickens - No VAT

However I also have a horse on part share for a fee of £100 a month. I cannot find any instruction on this. Would this be a VAT exempt category?

Does anyone have any ideas?
Thanks!

 

[marmalade76]

Unless this particular horse is part of your business then no.

 

[Orangehorse]

I can't answer, and you probably need a VAT expert to answer that question, but you can look on the Government Gateway information pages for VAT, what is exempt, etc.

Is the horse owned privately, or is it owned by the business? If it is privately, then no.

Farmers mostly claim a lot more from the VAT people than pay. The only time we pay is if we sell a machine that has VAT charged on it (and we have already claimed the VAT back when we bought it).

So be clear in your head exactly what your trade is.

 

[Andrew657]

Would think if you're reclaiming VAT on the expenses for the horse - then yes will be chargeable

 

[05jackd]

The horse would be classed as part of the business as we claim expenses for vet etc. if he was sold the money would go into the business but we wouldn’t pay VAT because of the margin scheme. So I’m thinking the same might apply to loaning a ‘second hand horse’.

 

[dixie]

If you’re claiming the vat on the expenses on the horse then I would say that the £100 is vatable - particularly as this is usually a payment towards the said expenses.

As to whether you should be claiming the vat on the horses expenses is another matter as presumably is for private use and not business ?

 

[MuddyMonster]

I can't work out from your posts if you own the horse and have a sharer or if the horse is owned by someone else and you are the sharer?

 

[05jackd]

It’s a bit of a minefield. We run the farm as a business and we breed horses to sell. So we are a business. We are not yet VAT registered so I am just trying to work out if it will be worth it.

I just can’t find any information on sharing a horse as oppose to selling it.

 

[ihatework]

Completely not qualified to comment here, but hey, its a forum so I will!!

Could look at it a couple of ways I suppose:

1. Horse is paid for by the business and as such is a business asset being hired out, as such probably subject to VAT. I would be cautious in this situation, as does it fall into the hiring a horse catagory and could impact your liability/insurance and ?need some sort of council license?

2. Your share of the horse is being run under the business. Your sharer is running their half of the horse. You might be better rather than taking a cash payment, for your sharer to purchase the equivalent in shoes/food etc. Whilst you might still be in the grey zone of whether a business asset, you might be able to navigate the potential 'hire' complications?

 

[marmalade76]

Good luck keeping your sharer, I can't imagine anyone expects to pay 20% VAT to share a horse.

 

[meleeka]

I’m no expert, but I’d assume quite simply, the horse is an asset and the £100 is income, so subject to VAT. If it were a car the business owner and it was hired out, it would be subject to VAT.m

Does the horse need to be owned by the business?

 

[AmyMay]

When I part loaned a horse under similar circumstances no money changed hands. I paid for shoes and offered services in kind.

 

[Goldenstar]

If you claim the horse’s expenses then yes it’s part of the business
I think however you need advice because you getting into a grey area and might be needing a good wage p

 

[Goldenstar]

That was the cat
What I was trying to say that you might be in a grey area where you are not insured because you need a local authority licence

 

[sbloom]

Do your sums carefully and dont just go with the accountants recommendation. After 20 years self employed and now back to Vat registered as I was in early days of a former career, I'm just a tax collector for the govt and have lost a chunk of my income. I can't charge my (retail) customers more just because I'm vat registered, and there is no vat I can reclaim on a significant "supply" to my business, my time. Even when I was selling to businesses the first time round it was a cost, not a benefit. Claiming vat back on supplies is simply part compensation for having to charge it in the first place.

An accountant recommended I go vat registered the first time round, this time I was forced to because of turnover and I can't see how it's of benefit overall, long term, for smaller businesses to be registered

 

[little_critter]

It would only be of benefit if a lot of the things you purchase for the business attract vat. Eg doorstep milk delivery business. Your sales (milk) are vat exempt so no change to what you charge your customers, but you would be able to reclaim vat on maintaining your milk floats, the vat on electric supply, the vat on the milk bottles etc.
I used to work for a milk delivery business and our quarterly vat return was usually a reclaim.

I suppose if you were going to make a large capital investment (eg buying a new fleet of vans) then it could be beneficial to be able to reclaim that vat, but you’d have to weigh up the short term benefits vs the long term cost.

 

[blitznbobs]

Are you looking at selling the horse to the business or charging yourself livery for the horse. If the first then you charge vat , if the second then you don’t. Be very very careful with the vat registration on your home, you may open yourself up to things like capital gains and corporation tax and also if you aren’t really running as a business but always running at a loss, tax fraud.

 

[Carlosmum]

The accountants advice may be a good idea, but I would set up the small holding as a small business in some way. All the small holding expenses/income would then be subject to VAT. If you are breeding and selling foals then these are part of the business assuming you are putting the expenses of the mares through the small holding bank account. If you choose to have the horse as past of the small holding ( ie feed & vet bills paid by S-h) then you should charge VAT on the share arrangement. If you maintain the ownership of the horse as private you will not need to charge VAT, however you will then not be able to reclaim and VAT on expenses related to that horse., you would either have to pay from a private bank account or put the moneys through your account book as Gross of VAT.
Generally with farm type business it is advantageous to be VAT registered as outputs are normally VAT 0% ( except equine) and inputs are 20% ( except feed and seed) of course all private items ( food, electric for home,) should be out of VAT if you claim for fuel for vehicle, be aware of the scale charge. Hope that helps, I am an agricultural book keeper so have been juggling this stuff for a long time.

 

[sbloom]

To be fair I was in the service sector with very low inputs apart from my time, the accountant reckoned I should go Vat registered so I could reclaim my set up fees....a desk, chair and PC The naivety of youth, I lived to regret taking his advice but can see how it could be useful in some sectors.

 

[05jackd]

The accountants advice may be a good idea, but I would set up the small holding as a small business in some way. All the small holding expenses/income would then be subject to VAT. If you are breeding and selling foals then these are part of the business assuming you are putting the expenses of the mares through the small holding bank account. If you choose to have the horse as past of the small holding ( ie feed & vet bills paid by S-h) then you should charge VAT on the share arrangement. If you maintain the ownership of the horse as private you will not need to charge VAT, however you will then not be able to reclaim and VAT on expenses related to that horse., you would either have to pay from a private bank account or put the moneys through your account book as Gross of VAT.
Generally with farm type business it is advantageous to be VAT registered as outputs are normally VAT 0% ( except equine) and inputs are 20% ( except feed and seed) of course all private items ( food, electric for home,) should be out of VAT if you claim for fuel for vehicle, be aware of the scale charge. Hope that helps, I am an agricultural book keeper so have been juggling this stuff for a long time.

Thank you. This is helpful. I definitely need more clarification from the accountant as to cost vs benefit. Some of the horses we sell would not attract VAT as these would be classed as ‘second hand’ in the margin scheme but this is rare. Maybe one a year? The foals certainly would attract VAT. It’s all the bits inbeween that are a bit grey! Much easier with the sheep!