HMRC attacks on holiday accommodation - May 2010
We have already published an article in a previous newsletter on this topic but it is still an issue and worth bringing to your attention again. This is the attack by HMRC on holiday accommodation which is run along side farming businesses. The situations which attract attention are those where there are separate B&B or holiday letting businesses which are not VAT registered. HMRC may try to prove that the separate business is in fact all part of the farm business and therefore should charge VAT on its income. The fact that the B&B or letting business is run by say the wife whilst the farm is run by the husband, makes no difference. HMRC will try to prove that they are the same business and have been artificially split.
In order to prevent such an attack, the following is a list of precautions you can take which should halt their attack from the start:
- ensure that any staff which are used in both the farm and the B&B/ letting business have separate contracts of employment
- ensure that there are separate records kept for each business
- ensure that there are separate bank accounts for each business
- if possible try to have separate telephone lines for each business
- ensure that advertising for the B&B/letting business is paid for by its own account and does not refer to the owners of the farm. In particular, where the B&B/letting business is run by Mrs Farmer, do not refer to Mr Farmer in any way on the website or other advertising material
- charge a rent from the farm to a B&B for use of the property
- make a simple written declaration from the farm to a B&B allowing use of the property for its purposes
- cross charges can also be made for use of utilities from the farm to the B&B/ letting business
Finally, these rules can also be applied to caravan sites which are run as a separate enterprise to the farming business.
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