VAT Update for Rural Businesses
In a general VAT update for rural businesses, our new VAT Director Len Dean flags a few key matters to look out for, including:
- Has lockdown impacted your income streams? Is your Vatable income lower than normal? Don’t let this cause unfairly low VAT recovery
- A reminder that deferred Customs declarations for imports from the EU post Brexit need to be made within six months.
- Since November 2019, individuals and partnerships can join VAT groups – useful to consider when restructuring, incorporating or tidying up your VAT.
26th May 2021
Many rural businesses have some VAT exempt income (e.g. residential lettings, some land rents etc) as well as Vatable income streams such as from tourism, holiday lets, hospitality and other diversification, that has been severely impacted by COVID. The time will be coming for many to do the VAT annual adjustment calculation on VAT recovered over the year. This is a reminder that HMRC released details in March of a COVID relief measure aimed at correcting unfairly low VAT recovery caused by COVID disruption (Revenue & Customs Brief 4, 2021). To reflect the exceptional circumstances HMRC has set up a facility to obtain accelerated approval for businesses to correct unfairly low VAT recovery rates caused by lower vatable income during the pandemic. So now is a good time to make use of this if you’re impacted.
The UK Government put in place an option of delayed Customs declarations for imports from the EU as a temporary Brexit easement measure from 1 January 2021. It has been extended to cover an additional six months through to 1 January 2022. However, the 175 calendar day deadline to make declarations is now upon us for imports from the EU in January. If you miss this deadline you could risk fines and lose the option to continue using the delayed declaration scheme. If you’re unsure check with your Customs agent / freight forwarder / express operator that Customs declarations are up to date. You will need these to get your Postponed Import VAT Accounting statements from Gov.uk as well.
Before this, individuals and partnerships were not able to be in VAT groups and in a sector where sole-proprietors and partnerships are common the benefits and simplifications afforded by VAT grouping have not previously been available. As well as the benefit of one consolidated group VAT return, VAT grouping can be very useful when restructuring, as transactions between parties in a VAT group are not subject to VAT. This is useful to consider for property and other transactions within farming families and rural businesses, issues around incorporating and other circumstances. Please note there are conditions required to be VAT grouped and implications of VAT grouping that need to be considered on a case by case basis.