In a recent HM Revenue & Customs? (HMRC) letter to the shooting organisations, it states: HMRC continues to carry out a programme of visits to shoots across the UK. You may get a visit in the coming year and some of these visits may be made without an appointment.
Further to my recent ST article on tax (Tax attacks, 1 June), I have produced some solutions to the problems being raised by these visits.
Shoot tax audit
So how should the shooting world prepare for the visit or even for correspondence on the subject? The suggested course of action is that every shoot undertakes a ?shoot tax audit?. Now I know it might be tempting, but don?t let such a dull word as ?audit? put you off.
The question raised is how such tedious terminology can be linked to something as passionate and enjoyable as shooting. There is a joke in the accountancy industry: Why did
the auditor cross the road? Obviously, the only answer can be, Because he did last year!
Ironically, the best way to tackle your shoot tax audits is not to do everything exactly the same as last year, but to look afresh at the problems. Take the time to identify your tax weaknesses and replace them with tax strengths.
The review should, to quote HMRC, encompass all areas of income tax, PAYE, Corporation Tax, National Insurance and VAT. It will also include such matters as the National Minimum Wage.
The shoot report
?Dramatis personae? There is potential for the shoot organiser to cover such issues as health and safety, gun licences and insurances in the review. The first stage of the audit is to produce a cast of characters for the shoot (see panel above right). All items should be cross-referenced and tracked within the report internally and externally (check the Internet to see what information the outside world holds). Barter ? swapping of days. There is one area of landowner or syndicate organiser barter that has not been the focus of reporting but that is certainly commanding respect by HMRC, which is swapped days
In a lot of cases the landowner and/or organiser might only take, for example, two days on their own shoot, but might invite a large number of guest Guns. In a form of the unwritten rules of friendship, they would then receive an equal number of days? shooting on their friends? shoots. These should, strictly speaking, be recorded as bartered transactions.
VAT and the shooting rights
In UK law, rights over land are generally exempt from VAT (unless the land is subject to opt to tax). However, the grant of a right to take game or fish is specifically excluded from exemption and is therefore taxable unless you are selling the freehold at the same time. Shooting rights are sporting rights as far as VAT is concerned.
The basic problem is that a right to take game is, in UK law, a severable interest in land, otherwise it would not be necessary to tax it by exclusion from the land exemption. UK law makes no distinction between a casual sale of a day?s shooting to an individual and, for example, the grant of all such rights over an area of land in perpetuity.
European Community law exempts the leasing or letting of immovable property and recent case law of the European Court of Justice (ECJ) has further defined the meaning of that term. The letting of an entire cross-country course, for example, could be the letting of land, but allowing someone on to the land to jump round the course is not. Provided that the characteristics of leasing or letting as defined by the ECJ are present, there is no reason why the letting of a shoot cannot also be exempt, subject to an option to tax. The shooting world will have to look carefully at this ECJ ruling to see what benefit can be obtained. HMRC?s policy on the letting of land with valuable sporting rights is to require an apportionment between the (exempt) land and the (taxable) rights where the latter exceeds
10 per cent of the total value.
The option is the right to opt to tax property. The shoot audit should consider what the Norwich Shoot Project Team (which has been taksked with the job of investigating gameshoots) will be looking for and this has already been well documented.
The concept of the auditor being dull has arisen from the idea that, unlike the tax advisor or accountant, they do not have to use their imagination, they just check, tick and cross reference. How wrong that concept is. The shoot audit now has an opportunity to shine, to review, to suggest and protect the shoot from the dangers of the outside world?
Tax audit check list
This audit should include:
and their duties
pens drives and so on
VAT returns and registrations and so on
and evidence of compliance