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Organic farm: VAT

Organic farms and VAT

VAT is charged on goods at either the standard, reduced or zero rates and there are also some supplies (like letting land for festivals) that are exempt from VAT.

Which rate?

It is likely that most, if not all, of the produce that you sell will be zero rated. If this is the case, you probably won't have to register for VAT if you don't want to, even if your total sales reach the VAT registration threshold. However, if you don't register you won't be able to reclaim the VAT that you pay on your business purchases.

Depending on how your business operates, it's also possible that you will make some supplies that are standard rated. These include things like bed and breakfast and self catering accommodation, charging for farm visits, riding lessons and so on.

Some supplies may also be at the reduced rate, for example sales of logs and kindling for domestic use.

As an alternative to registering for VAT so that you can reclaim VAT on your business purchases, you may consider joining the agricultural flat rate scheme. Under this scheme, instead of reclaiming VAT on inputs, you would add a flat rate percentage of 4% to everything you sell to VAT-registered customers.

Making Tax Digital (MTD) for VAT

Under HMRC's Making Tax Digital initiative, VAT-registered businesses with taxable turnover above the VAT threshold must keep records digitally and use special software to submit their VAT returns. You can find out more about MTD on the website.

Further information

VAT can be a complex issue so it's a good idea to contact the HM Revenue & Customs (HMRC) VAT Helpline on 0300 200 3700 for further guidance.

You can also download VAT Notice 700/1 Should I be Registered for VAT? and VAT Notice 700/46 Agricultural flat rate scheme from the website.