Farmers are being reminded of a number of potential tax pitfalls to be aware of if offering festivals, concerts or other such events this summer on farmland.
For farms and estates, making sites available for summer events can be a lucrative source of additional income.
The types and scale of summer events hosted by farmers and landowners are wide-ranging – even on-farm outdoor cinemas are taking off.
Other ventures include musical, cultural, and sporting events from large festivals taking place over a number of days, to the smaller ‘pop-up’ events, which are available to attend for a limited period in one day.
Income might include that generated from admission tickets to car parking and camping, and might be based on numerous different variable elements.
But accountant Saffery Champness is reminding farmers and landowners that there a number of potential tax pitfalls to beware of.
Nick Hart, director at Saffery Champness, says: “There is a misconception that complexities and risks only arise with larger 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 the implications the event 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 very 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.”
Questions to ask
Saffery Champness says it is sensible to ensure the relevant tax issues are being addressed by considering the following questions before entering into any agreement for an event to take place on land or site:
• 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.
Mr Hart says that for VAT, the major consideration is whether VAT is due on any rents or licence fees received.
"This is not just a case of whether the land has been opted to tax by the landowner, or the party which is the beneficiary of the income.
"Even when the land or site is not opted to tax, such income is still subject to VAT where the licence being granted, or the pitch hire, goes beyond a passive licence to occupy."
Any additional service or support provided will often mean the income received is subject to VAT and not VAT exempt, he explains.
Admission tickets, granting facilities for car parking and also the provision of camping pitches are all supplies subject to VAT.
Mr Hart goes on to say: "Arrangements regarding certain types of event can be complex, with the site owner often acting as an agent for owners of artwork who are exhibiting their pieces for sale during an event such as an art fair.
"The site owner may take payment from attendees purchasing those pieces and receive a commission for doing so.
"The site owner would then need to be mindful of the value of its supply as agent, to ensure the correct VAT accounting."