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HMRC: A guide to game shooting and the taxman

In the current economic climate, indications are that commercial shoots are placing increasing importance on profitability by reducing costs and, where possible, raising charges. Meanwhile, private shoots are understandably attracted or tempted by letting occasional days to defray or to cover their costs.

Even slight changes as to how a shoot is set up or managed can increase its exposure in terms of tax. Her Majesty’s Revenue and Customs (HMRC) is known to be running an ongoing campaign targeting shoots – with some notable successes. Equally, there have been several recent cases where HMRC has been forced to back down.

There are also some important changes in the offing regarding payments for casual labour, which in the case of shoots will affect beaters and pickers-up. Therefore shoot owners and operators will need to gear up and adapt their systems to meet these stringent new rules.

What makes a shoot a business, and therefore liable to tax in the eyes of HMRC?

A commercial shoot – one run with a view of generating profit – will be liable to tax. A private shoot, where days or guns are taken only by family and friends, even if they contribute towards the cost of running the shoot, should not be liable to tax provided everybody bears their fair share of overheads. However, as soon as one gun, or one day, or one bird, is marketed for let, or one corporate day is sold, then the game changes in a very literal sense. It is the marketing that is the trigger.

Be warned, a landowner may unwittingly invite interest from HMRC by the way they describe their arrangements – be that on a website, as reported in a shooting magazine or through social media. HMRC will also look at who is buying poults or game feed, or examine agents’ books to see who is using their services to let days.

In the eyes of the law, a commercial shoot attracts participants by marketing and granting rights to shoot in return for payment, whereas participation in a private shoot is by invitation rather
than by right.

What are the changes to the rules regarding payment for beaters and pickers-up?

Since 1985, the payment of wages to beaters and pickers-up has been subject to a National Agreement reached with HMRC setting out the position on PAYE. However, all that will change with the introduction of Real Time Information (RTI) from April 2013, when ‘employers’ – or in this case the person exploiting the sporting rights, shooting club or syndicate – will be legally required to submit electronic returns of payroll data to HMRC.

Under RTI, information about PAYE payments must be submitted online on or before any payment is made to an employee, and there will be a requirement to report the number of contracted hours for each employee. Even employing one person for one day will be subject to this online filing requirement. All casual labour will need to be included on the payroll, and all existing rules regarding casual labour are to be superseded.

The onus is on the employer to know the full (official) names of employees, their dates of birth and National Insurance Numbers. There will be penalties for non-compliance.

Are there advantages in being structured as a shooting club?

When the standard rate of Value Added Tax (VAT) increased to 20 per cent there was a surge of interest in converting to ‘sports club’ status because these entities are VAT exempt.

However, a ‘sports club’, although carrying on a business, must be not-for-profit and also free from ‘commercial influence’, so shoots that rely on let corporate days to generate income would probably not opt to go down this route; nor would a private shoot where a very personal, hands-on approach to the running is preferred.

The VAT exemption exists to encourage clubs to attract individuals as members to take part in sport, and selling a day to a company is not a supply to an individual. On the other hand, there is nothing to stop a group of people who happen to be work colleagues enjoying the exempt facilities of a club together if they are all members.

It would be worth considering conversion of status to a sports club if your shoot does not make a profit, but tries to break even, if the same people tend to participate on a regular basis year after year; if new guns are recruited by word-of-mouth rather than advertising, and the cost of the shooting to the shoot owner is roughly the same as that paid by other members.

Conversion would tend to be unsuitable, however, where a shoot makes a profit, or provides the owner and their family or friends with ‘free’ or heavily subsidised shooting, where availability of guns in return for payment are marketed/advertised, and where more days are sold to corporates than to individuals.

As a shooting club, nearly all subscriptions and fees paid by members are exempt from VAT, you can advertise member vacancies, and you can provide transport, beaters and lunches in the normal way. However, you cannot be an officer of the club or otherwise control it if you own the shooting rights or the land. You cannot reclaim VAT on any expenses of the club, you cannot advertise commercial shooting, you cannot distribute a profit, and you cannot provide exempt shooting to non-members, or someone who is a member for one day only.

What are the tax rules on gifting shooting days?

The gift of a shooting day is not uncommon, particularly from the proprietor of a commercial shoot, but there may be taxation consequences attached to such a gift that must be considered, on the part of the donor or the recipient.

Gifts to family members who are not involved in the running of the shoot would not be regarded as business related. Therefore the tax deductibility of shooting expenditure would be restricted by the ‘cost’ of the gift.

A gift to an employee in the course of staff entertaining would be regarded as business use. While there would be no restriction required by reference to the ‘cost’ of the day, there may be a benefit in kind arising on the employee that would need to be reported on the annual HMRC benefits form P11d.

Where a gift is made in respect of other supplies or services – for instance, a day is gifted to a supplier of eggs or poults to the shooting business – this would fall squarely within the context of a ‘barter transaction’. In other words, the shoot proprietor would have to account for VAT on the open market value of the shooting provided, and the supplier would also have to value his supply accordingly.

How does HMRC regard a shooting syndicate?

Syndicates are non-business activities. However, to HMRC, a syndicate is a group of people who share the cost of running a shoot, rather than a number of people who turn up to shoot having paid their rate for the day, gun, half a gun (or however the syndicate is structured).

A First Tier Tax Tribunal case in 2011 held that the running of two shooting syndicates fell outside the scope of VAT. The tribunal rejected the argument from HMRC that free days provided to the landowners in return for the grant of shooting rights were the equivalent of ‘let’ days. The resolution was that the days were a consideration given by the syndicates rather than exploitation of the rights in return for a fee.

Payment by ‘barter’ is common among syndicates, but this can create issues in relation to VAT.

Douglas Gordon is a partner at chartered accountants Saffery Champness, and a member of the firm’s landed estates and rural business practice group.

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