VAT On Farmhouse Expenditure - December 2007
HMRC accept that input tax incurred on farmhouse expenditure is partly for business use. The farmhouse is often used for storage of medicines, for lambing, for preparing the records, meetings etc. Therefore, it is allowable to apportion any VAT incurred on farmhouse expenditure and claim the business element.
The business proportion will vary from farmhouse to farmhouse and will depend on the size and character of the property and the type of expenditure.
Where the farm is a full time activity, and the input VAT is incurred on general repair and maintenance, HMRC have agreed that up to 70% of the VAT can be recovered. This will be reduced to the extent that the farming activities are part time by an appropriate percentage.
For improvements, alterations or extensions the recovery of VAT must be judged on the individual circumstances. For example, expenditure on a new farm office would attract 100% recovery whereas expenditure on an extension for a new bedroom or bathroom may attract no recovery at all.
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