Are you dealing with VAT correctly on livery services? 5 tips for the unwary1st November 2016 | Posted in: Business Tax, Company News, VAT
The VAT treatment of livery services can be complicated and is an area where we often see errors. The correct VAT approach depends on the type of livery and services provided.
5 key issues to watch out for are:
1. If you are providing full or part livery services such as mucking out, feeding, grooming and general care, this will be standard rated for VAT purposes. If you therefore exceed the VAT threshold for VAT you must register for and charge VAT on the livery services, but will be able to reclaim VAT on your costs.
2. If you are providing DIY livery services, which is predominately stabling with minimal animal care, this is treated as an exempt supply of land. In this situation you do not charge VAT on your livery service and are unable to reclaim any VAT on your costs relating to this service. You could, however, elect to charge VAT on the stable which converts the exempt supplies into taxable supplies. This is a complex area of VAT and further advice should be taken before considering this option.
3. If you are providing grass livery this is treated as zero-rated and you can therefore reclaim VAT on costs relating to this service without charging your client VAT.
4. If you have clients using your services only because of the special purpose of the yard e.g. sending the horse for schooling or competition to a yard because it is a show jumping yard, all services are standard rated because stabling is no longer the predominant supply.
5. If the livery services are part of a larger business and simply an additional source of income from the land, you must be aware of partial exemption VAT rules and professional advice is recommended.
Applying the correct VAT treatment is important and poor advice might be costing your business money or could result in HMRC penalties if you are incorrectly accounting for VAT. There are also other taxes to consider when providing your livery service, including inheritance tax, so advice from your professional adviser is highly recommended.
We are the leading Equestrian specialist accountancy firm in Scotland. Lead by Director Lea Brash, who co owns her own equestrian business in Scotland and competes and breeds her own horses, our equestrian specialist accountants are constantly trained on the nuances of equestrian business in Scotland.
It is always best to get specialist advice on these matters and therefore if you have any accounting or tax queries relating to your equestrian business please get in touch with Lea Brash on 0131 317 7377.