Hobby farming

Hobby farming

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We have a client who has an engineering company to which he devotes the majority of his time.

he owns a farm where he resides with his family. He has 8 ewes, one tup and a goat. He wants us to claim relief for the tax loss he makes each year on the upkeep of the land, animals and equipment (which consists of a tractor and an agricultural building to house the sheep in bad weather).

Given the scope of the operation we can see no way in which he possibly make a profit (the only income relating to the "farm" in 6 years is £135) and have advised that relief is denied- IM3375-trade must be carried out on a commercial basis and with a view to a realisation of a profit.

But what do we do about VAT. He's been Vat registered for a number of years reclaiming any input vat suffered - Do we tell him he must deregister or is the "test" different for vat?

simon

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By Taxi
17th Jan 2007 13:43

Lots of farms are not profitable, but I agree if there is
no hope of ever making a profit it is not commercial. Is he eligble for single farm payment - that might make a difference, and then you can claim his loss (subject to hobby rules).
De-registering means that he will pay VAT on the assets he still owns, so you need to look at the figures.
You might be able to add some value on advising him on IHT - a hobby farm is no generally subject to agricultural property relief.

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