Smallholding for subsistence farming

Smallholding for subsistence farming

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Hi there

I have a couple who are setting up their own smallholding purely for subsistence farming.

My question is that a smallholding purely for subsistence - is it a business and does it need to be registered as such with HMRC, or is it only if they begin selling excess stock that it becomes a business?

Any opinions or answers would be appreciated

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paddle steamer
By DJKL
22nd Mar 2016 16:17

Any grants to be received

Are they going to be receiving subsidies/grants? E.g. I think some of the forestry grants require a badge of commerciality

I was advised about one grant last year involving planting wildflowers, whilst the initial work involved ploughing a meadow and then sowing seed thereafter it would, in the main, thereafter be self seeding and it looked like a reasonable surplus per acre was possible after year one-however we sold the land in November so cannot try it out.

Then again the way the grant system has been operating in Scotland (or has not been operating) not sure we would ever have seen the money-will need to check but I think last recurrent forestry grant we we received was 2013,-the new system does not work.

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By michaelblake
22nd Mar 2016 17:30

Not trading for income tax purposes

Subsistence farming where there is no intention to sell produce to others or barter produce with others in exchange for products or services provided by others twill not be a taxable trade for income tax purposes.  

A person is required by TMA 1970 Sections 7 and 8 to make a return of his income and gains.

Income is however only taxable if can be attributed to a source and trading profits have to arise from either a trade or an adventure in the nature of trade to be taxable. As the guidance at BIM20000 notes

"Broadly, ‘trade’ can be taken to refer to operations of a commercial kind by which the trader provides to customers for reward some kind of goods or services. The extension of the definition to ‘ventures in the nature of trade’ allows for the inclusion of isolated or speculative transactions, although not all such transactions will be within the definition. The courts have also found the so-called ‘badges of trade’ to be helpful indicators of trading in some cases.

Having established that a trade, or a venture in the nature of trade, exists, the next question to consider is the scope of that trade. This may be relevant in establishing what income is included in the trading receipts, and what expenses are allowable."

 As a general rule a person cannot make a profit out of himself or trade with himself.  

 

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