Livery businesses are particularly difficult to structure from a tax perspective and it is advised that owners should spend time reviewing agreements with their clients on a regular basis to ensure that they are being as tax efficient as possible. This is in order to qualify for VAT exemptions and inheritance tax relief.
VAT exemption
One reason why it is important to do this is because livery services can be exempt from VAT if structured correctly which means there will be no chargeable VAT to customers.
How does this work?
For the whole supply to be VAT-exempt, livery owners will need to offer their clients:
- A ‘grant of an exclusive right’ or a ‘licence to the specific stable’
- Ancillary care elements
In addition to this livery owners will need to ensure that an option to tax election has not been made over the stables. Where the exclusive right or license is granted first and foremost. The VAT position will not be affected by the level of care provided. It is important to note that this only applies to specialist yards including stud farms, racehorse stables and schooling stables.
Inheritance tax
If your asset qualifies for business property relief, 100% inheritance tax relief will be available.
How do livery owners qualify for business property relief?
If livery owners only offer grazing agreements and horse owners take full responsibility for their horses then your business will not qualify for business property relief because this is viewed as a passive activity. However, if your business offers additional services such as health checks and feeding etc, then it is more likely that your business will qualify for the relief. If you would like to find out more about business property relief please visit: https://www.gov.uk/business-relief-inheritance-tax
How can we help?
At Hawsons our experts will be able to advise you on your livery business and how you could take advantage of these VAT and inheritance tax reliefs.
Hawsons has a dedicated team of specialist agriculture accountants in Sheffield, Doncaster and Northampton. We know that farming isn’t just a business; it’s a way of life.
Dan Wood
Partner
Related news
Farming Partnerships: Why the Structure Matters for Tax and Control
dw@hawsons.co.uk What is a farm partnership and why does structure matter? A farm partnership is a common structure for family-run farms in the UK. A farming partnership agreement sets out who owns the land, how profits are shared and what happens when circumstances...
Farm Accounts: Are you making the most of your Management Information?
dw@hawsons.co.uk Still only checking your books at year-end? When we speak to farming clients, there’s a pattern we see time and again. Most farms still only look at their accounts once a year, usually around tax time. Bookkeeping is something that gets done late at...
VAT on Farming: Common Mistakes Farmers make and how to Avoid them
dw@hawsons.co.uk You’ve worked hard to build something lasting. Don’t let VAT mistakes catch you out. It all starts with a small decision… You’ve just put up a new grain store. The builders have finished, you’ve got the invoice in your hand, and you’re...