VAT

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:

  1. Has lockdown impacted your income streams? Is your Vatable income lower than normal? Don’t let this cause unfairly low VAT recovery
  2. A reminder that VAT payments deferred during lockdown 1 are due for repayment but an instalment plan can be agreed
  3. Since November 2019, individuals and partnerships can join VAT groups – useful to consider when restructuring, incorporating or tidying up your VAT.

26th May 2021


1. Has lockdown impacted your income streams? Is your Vatable income lower than normal? Don’t let this cause unfairly low VAT recovery.

Many rural businesses have some VAT exempt income (e.g. residential lettings, some land rents etcas 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. 


2. A reminder that VAT payments deferred during lockdown 1 are due for repayment but an instalment plan can be agreed with HMRC.

If you deferred VAT payments to HMRC between March and June 2020, and you were unable to pay them in full by 31 March 2021, you may be able to avoid additional penalties and interest and there is still time to apply to pay it in instalments. Applications must be made to HMRC by 21 June 2021. 

Details are at: Pay VAT deferred due to coronavirus (COVID-19) – GOV.UK (www.gov.uk) 


3. Since November 2019 individuals and partnerships can join VAT groups – useful to consider when restructuring, incorporating or tidying up your VAT.

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. 


If you would like to discuss the above or any other VAT matter Len would be delighted to hear from you.