Jump on the Events Bandwagon with Caution

Making part of the farm or estate available for a summer event, whether cultural, musical or sporting, should on the surface provide a valuable additional income stream for the business - but there are a number of potential tax pitfalls to beware of says Saffery Champness.

Types of event can range from the modest with just a handful attending to major public events and festivals.

Highland Pony Show

The tax implications of any event happening on their land need to be carefully considered by the farmer or landowner well in advance.

There is a misconception that the rules only apply to major events, but even those putting on something much less extravagant with only a handful of people attending need to consider how that might affect their tax liabilities, and what implications this might have. For example there can be consequences for both inheritance tax and VAT and not taking these into account at the time could prove to be costly in the future.

Also, provided certain criteria are met, the tax position of the individual who owns the land can be much improved if they run the event themselves, or enter into a joint venture with the organiser.

A tax check list for a farmer or landowner to consider before setting up or entering into an arrangement for an event is as follows:

  • What is the landowner’s involvement – is it purely a rent received for the use of the land by a third party?

  • Should VAT be charged on that use?

  • Will VAT be recoverable on any related costs incurred with the event?

  • How will income be taxed in the hands of the recipient?

  • Does the occupation of the land for an event (such as a festival) have an impact on agricultural property relief that might otherwise be available for inheritance tax purposes?

The issue of VAT on the hire of pitches for stalls at organised events such as game fairs, rural shows and craft fairs was clarified in Autumn 2016 with the decision from the Upper Tax Tribunal in the Craft Carnival case in favour of HMRC. This has set a precedent for VAT being due on the hire of pitches at organised events as this goes beyond simply a license to occupy land which would be VAT exempt.

Saffery Champness

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