Farmers and the agricultural flat rate scheme

By Tolley

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Farmers and the agricultural flat rate scheme
  • Scheme requirements
  • What are eligible goods and services?
  • Businesses who are not eligible to join the scheme
  • Joining the scheme
  • What happens after joining the scheme?
  • Cross border trading
  • Leaving the scheme
  • Can a business rejoin the scheme?

It is possible for farmers to elect to use the agricultural flat rate scheme rather than VAT register in the normal way. This guidance note provides an overview of the scheme and how it operates.

VATA 1994, s 54SI 1992/3220 (subscription sensitive)SI 1995/2518, regs 202-211De Voil Indirect Tax Service V2.191–198 (subscription sensitive)VAT Notice 700/46 

Farmers who elect to use the scheme are not required to submit a VAT return to HMRC or account for any VAT due on supplies made. Farmers using the scheme charge and retain a flat rate of 4% on the sale of goods and services. Farmers using the scheme cannot recover VAT incurred on costs associated with their business activities.

Further information on the VAT treatment of farming activities can be found in the Farming and other rural activities guidance note.

Scheme requirements

In order to join the scheme a farmer must meet the following requirements:

  • the business must provide goods or goods and services that are eligible (see below)
  • the business must not be VAT registered. If the business is VAT registered and elects to use the flat rate scheme the business must cancel its existing VAT registration number (see the Cancelling a VAT registration number guidance note)
  • the business has not, in the three years before the date of application for certification:
    • been convicted of any offences in connection with VAT
    • accepted an offer to compound proceedings in connection with a VAT offence; or
    • been assessed to a penalty for VAT evasion involving dishonest conduct
  • the business satisfies HMRC that, in the year following the date of certification, the amounts of the flat-rate additions which are charged will not exceed the

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