This scheme has been in existence since 1st January 1993, and is an alternative to VAT registration for farmers and certain other people involved in agricultural production activities or similar, as defined by HMRC.
The trader should charge a “Flat Rate Addition” (FRA), being a percentage of the sale price of qualifying goods and services (currently 4%), but will not be able to reclaim input tax on their business purchases.
The FRA can only be charged to VAT registered customers.
The FRA is not VAT, and the farmer is allowed to keep it. The addition acts as compensation for the loss of input VAT that might otherwise have been reclaimed had the farmer been VAT registered.
Those within the scheme must NOT be registered for VAT – if they are, they must de-register.
Any VAT registered customer can reclaim the amount charged as FRA as if it were VAT input tax.
If you have any questions about this scheme, please get in touch with our Agricultural experts who will be happy to assist.
Posted by John Smith-Daye
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.