Farmers and crofters hoping to earn some extra cash over the festive period have been urged to ensure any diversification does not land them with a big tax bill.
According to Susie Swift from accountancy firm Saffery Champness’ Inverness office, festive diversification ventures which are not directly related to a farmer or crofter’s main business activity could have tax implications.
Festive farm diversification ventures include: letting land for winter wonderland type attractions; operating a Christmas market or fair; selling Christmas trees, holly, logs or other seasonal products; and charging rent to someone else to sell Christmas trees.
Ms Swift said: “Whilst the income from such activities obviously needs to be declared it is important to ensure that it is included in the appropriate section of the tax return.
“Failure to do so could have adverse effects on the Inheritance Tax (IHT) status of the business and its assets, or reduce the opportunity to pay pension contributions.”
In addition, farmers will need to account for VAT, if they are VAT registered, on the sale of any festive goods.
“Similarly, letting land that has been opted to tax will mean that the operator will need to pay VAT in addition to the agreed fee for the use of the land concerned,” added Ms Swift.
For non-VAT registered businesses, she urged farmers to be aware that any additional income could push their business over the VAT threshold.
She added: “Christmas events, if run in-house, may require additional temporary staff. Remember that staff taken onto the payroll, however temporary, and despite how they may be paid, will be subject to the normal PAYE regime including Real Time Information reporting.”
Johnston Carmichael partner and head of agriculture Robin Dandie said farmers should ensure that their insurance covers the new business venture.
“Any diversification from the core business requires some thought and planning to maximise the possible returns,” he added.
“The diversification needs to be regarded as having potential to add to the overall profitability of the business and then any tax saving opportunities can be reviewed.”