Q: We’re trying to set up a livery yard and are confused about the conditions concerning the application of VAT to charges. We’ve heard that some services provided by livery yards are exempt from VAT, but don’t know which. How can we find out more?
If your company has an annual turnover of more than £61,000, you must register for VAT; if it is below this figure you don’t have to worry about it. Once your business is up and running, if you know any time that you’re going to exceed the minimum limit within the next 30 days, you should notify HM Revenue & Customs.
Once registered, you will need to charge your clients VAT, at the standard rate of 17.5%, on most services — and pass that money on to the tax man. You will also be able to claim back VAT on many things you buy for the business.
Livery services, such as mucking out, grooming, feeding and arranging veterinary treatment, must carry the standard rate of VAT.
However, there are certain exceptions to this, specifically relating to “exempt rights over land” with regard to stabling. This means that if you allow a horse owner exclusive use of a particular stable in your yard as part of the livery agreement, this can be treated as a VAT exempt supply of land. In this case, you don’t have to charge the horse owner VAT on anything you supply in the livery package, and you cannot claim back VAT on anything you supply.
You can opt to charge VAT on the rented part of the stable, and then claim back the VAT on the things you buy to service it. If you take this latter option, you have to do so for a minimum of 20 years.
Animal feed is zero rated for VAT, provided it is not packaged as pet food. So hay, cereals and other feeds will not carry any VAT if you sell them to outside clients. However, if they are provided as part of your service, they are standard-rated for VAT. They can only be zero-rated when no element of care is supplied by you — for example, if you are selling them to a DIY livery client — or if the stabling is an exempt right over land that you have not opted to tax.
Similarly, grass and grazing rights are also zero rated, provided they are not part of a livery agreement that is subject to VAT.
For more information and a range of leaflets visit www.hmrc.gov.uk or call the HMRC national advice line (tel: 0845 010 9000).
This Q&A was first published in Horse & Hound (7 December, ’06)