Agriculture Flat Rate Vat (AFRV) update webinar

The webinar was organised by the Ulster Society of the Chartered Accountants of Ireland and from HMRC, was policy lead for AFRV Kevin Coyle and Nicola Hussey.

HMRC’s new entry and exit rules came into effect on 1 January 2021, however many famers in the scheme are still confused by how the new rules operate. Also, many farmers who are not part of the scheme or who used to be part of the scheme, are not sure of how the new rules will operate. For those farmers who are in the scheme they cannot reclaim input tax but will charge a four percent addition when selling goods to a VAT registered business.

From 1 January 2021:

Businesses can join the AFRV when their annual turnover for farming related activities is below £150,000. Businesses must notify HMRC once their annual turnover for farming related activities exceeds £230,000 to be deregistered from the scheme and registered for VAT instead. Businesses with turnover for non-farming related activities that exceed £85,000 will still be required to register for VAT and will be ineligible for the scheme.

New information

Kevin Coyle from HMRC explained that farmers must leave the AVRV scheme if their turnover exceeds £230,000 in any 30-day period or when the annual turnover exceeds £230,000 in the 12 months from the date they registered from the scheme. To leave the scheme farmers need to write to HMRC and inform them that they have exceeded the threshold. The farmer then must register for normal VAT. The sole responsibility and obligation for deregistering is with the registered farmer and not on any processor or other body.

Compliance

It was explained that HMRC are looking at a new approach to compliance and warned that those thinking or considering splitting businesses to avoid/dodge or get around the rules is not permitted under the legislation. HMRC were asked a number of questions from industry stakeholders and are to come back and confirm these. These issues included if a basic farm payment was included in the turnover, can farmers re-join the scheme after a period of time if they leave the scheme and can famers who deregister reclaim capital purchases in the past three years. The UFU raised the issue of the different flat rates between the Republic of Ireland and the UK, and how the schemes operate in the two different regions.