10 top tax tips that will keep the taxman off your back and help you save a few pounds in the way you run your shoot. By Alison Robinson.
Tax tip 1. Check your shoot meets the right criteria
Shoots that are run on a non-business basis, such as private shoots and shooting syndicates without a view to profit, should take the opportunity following the season’s end to review their arrangements for the forthcoming year to check they still meet the definition of a non-business shoot for VAT purposes. In particular, where contributions are received towards the cost of maintaining a shoot from other ‘guns’, HMRC will only accept you are not making a VAT-able supply if the following conditions apply:
• Only friends and relatives shoot with you.
• You do not publicly advertise the shooting.
For private shoots, your shooting accounts must show an annual loss at least equal to the usual contribution made by guns over a year and the loss is not borne by any business but by you personally.
Tax tip 2. Ensure you use the right language
It is important that everyone involved with a non-business shoot understands that it must be run on that basis and refers to it in suitable terms at all times, especially in writing. For example, the guns should make “contributions” not pay “subscriptions”. If you are tempted to let a few days out, take professional advice or it may result in the entire shoot being treated as a business activity for VAT purposes.
Similarly, for shoots run as a business for VAT purposes, such as commercial shoots and shooting clubs, it is a good time to review your arrangements. Commercial shoots where the owner takes one (or more) day’s shooting, need to be aware this gives rise to income tax and VAT considerations (and benefit-in-kind issues if the business is undertaken by a company), and arrangements should be refreshed from time to time.
Tax tip 3. Pay casuals monthly
Those with 10 or more permanent employees will have been operating under the full Real Time Information rules for 2014/15. Looking ahead to next season, an option that could be considered to avoid the need for weekly payroll reporting would be to pay shoot casuals monthly as part of the employer’s normal payroll run. However, there are practical considerations such as obtaining the relevant bank details from casuals. In addition, this would preclude the treatment of any such individuals as being ‘daily casuals’ and thus exempt from PAYE under the agreement between the HMRC and the Country Land and Business Association (CLA). For small employers (those with more than 10 but no more than 49 employees), the penalty regime for Real Time Information reporting came into play on March 6, 2015, for in-year submissions. For employers with 50 or more employees, the penalty regime came into effect on October 6, 2014.
Tax tip 4. Reclaim VAT on forfeit deposits
If a non-refundable security deposit is received from a potential client and it is forfeit due to late cancellation, it becomes outside the scope of VAT as no service is provided. In such circumstances, if VAT has been deducted and paid to HMRC it can be reclaimed. There is a four-year window for a reclaim to be made.
Tax tip 5. Consider your Annual Investment Allowance
Commercially run shoots should plan ahead regarding capital expenditure to ensure they do not fall foul of the proposed reduction in Annual Investment Allowance from £500,000 to £25,000 on December 31, 2015. Many businesses will have financial years straddling this date and they will need to compute the allowance available on a pro-rata basis.
Tax tip 6. Plan well if you have a joint keeper
Shoot businesses with joint employment arrangements should ensure these are effective for VAT purposes. Firstly, a joint employment contract must be in place. It is also important that in practice each employer exercises control, supervision or direction of the employee when they are working for that joint employer. This may be relevant for staff jointly employed by various entities on the same estate, or where a keeper is employed by two neighbouring estates.
Tax tip 7. Assess your properties
The Office of Tax Simplification (OTS) has recommended dropping the “customary” test in relation to exempt living accommodation, as well as introducing a system of open market rental value for calculating the benefit-in-kind charge where the exemption does not apply. Employers may wish to consider assessing the living accommodation they currently provide against the OTS’s proposed criteria for exemption to see how they and their employees might be affected.
Tax tip 8. Understand pool cars and company cars
Shoot employees who are provided with a car that is available for private use, even if it is not used privately, will be liable to a benefit-in-kind charge based on the list price of the car and its CO2 emissions. There is an exemption from the charge for pool cars, but these must meet the following strict conditions to qualify:
• They must be used by more than one employee.
• They must not ordinarily be used by one employee to the exclusion of others.
• They must not normally be kept at or near employees’ homes.
• They must be used only for business journeys – private use is only permitted if it is merely incidental to a business journey (for example, commuting home with the car to allow an early start to a business journey the next morning).
Tax tip 9. Reduce National Insurance payments
The Employment Allowance was introduced on April 6, 2014, enabling employers to reduce the amount of National Insurance contributions (NICs) they pay for their employees by up to £2,000. Shoot businesses run with a view to profit will be eligible for this allowance and should check with their payroll provider that it has been claimed. For businesses that undertake commercial shooting and also run private shoots on behalf of their owners, it is important to note the allowance should only be claimed against NICs paid in respect of commercial shoot wages.
Tax tip 10. Weigh up the mixed estate equation
Running a commercial shoot as part of a mixed estate may be helpful when looking at whether Business Property Relief might be available for the business in the round. If the sporting rights are simply let to a third party then they would fall on the investment side of the equation when considering whether the predominance of the estate activities are trading in nature and not investment. If the estate is marginal then running a commercial shoot may just tip the balance to give relief on the whole. Similarly, those operating a private shoot might consider running it on a commercial basis to improve their inheritance tax position, but should be wary of the resultant VAT implications, including having to account for VAT on the shoot income.
Alison Robinson is a partner at Saffery Champness accountants.