Farmers and landowners advised to be tax compliant over festive activities - Saffery Champness

Coll Murchison-MacDonald
Coll Murchison-MacDonald

Scottish farmers are being warned that if they have a Santa grotto in their field or a Christmas fair in their barn then they should make sure that they are tax compliant, says Saffery Champness

It’s that time of the year again when farms and estates may gain some extra income either from staging events themselves, or from making land or buildings available for other operators.

For example:

  • Letting land for winter wonderland type seasonal attractions.
  • Staging a Christmas market.
  • Selling Christmas trees, holly, logs and other seasonal products.
  • Charging a rent to another operator for the sale of Christmas trees.
  • Running events on the property such as a carol concert or a Christmas fair.

Coll Murchison-MacDonald, a Partner with UK top 20 Chartered Accountant Saffery Champness and based in the firm’s Inverness office, said: “Income from such activities clearly needs to be declared and included in the appropriate section of the tax return. Failing to declare such activity accurately could impact on the IHT status of the business, or potentially reduce the opportunity to pay pension contributions.

“VAT status of any seasonal activity is crucial. For example a farmer selling Christmas trees will need to account for VAT on the sales price. Similarly, letting land that has been opted to tax to a third party for them to undertake a commercial venture will mean that the operator will need to pay VAT in addition to the agreed fee for the use of the land concerned.

“Additional seasonal activity can also require temporary staff, and any staff taken onto the payroll, even if for just a few days, and no matter how they are paid, will be subject to normal PAYE rules and RTI reporting.”

Where a farmer or landowner makes an arrangement with a third party for use of ground or buildings a number of points should be considered, the firm said:

  • Extent of involvement – is it simply one of receiving rent for the use of the land?
  • Is VAT chargeable for that use?
  • Will VAT be recoverable on any related costs incurred?
  • How will income be taxed in the hands of the recipient?
  • Might an event, such as a Christmas Fair, have an impact on Agricultural Property Relief that would otherwise be available for inheritance tax purposes?

Saffery also explained that it should be noted that a precedent was set for VAT being due on the hire of pitches at organised events in the Craft Carnival case in 2016, clarifying that such activity went beyond simply a license to occupy land which would be VAT exempt.