As we look to next season’s shooting, now is an opportune time to consider your shoot structure. There are many tax pitfalls for both commercial estates and the humble syndicate that proper planning can help avoid.
Commercial v non-commercial
The first question you have to ask is why am I running my shoot? If it has a sporting motive then you may fall out with most areas of tax. Conversely a wholly commercial shoot is just like any other trading business. Simple, or so it seems. The commercial shoot is one that is operated as a business, with a view to making profits. Income arising is within the scope of VAT and profits are liable to income tax and in some cases NIC. Trading losses, subject to the usual restrictions, can be offset against other income, usually as part of a wider estate business. Also, while agricultural land does not incur rates, land used for commercial shoots may. Conversely, the landowner may carry out shooting on a non-commercial ‘in-hand’ basis. This is effectively a “cost sharing” arrangement, with possible alternatives in the form of a syndicate or a sports club structure, and if structured correctly should be outside the scope of tax and VAT. VAT is a key consideration for shoots as it increases the cost to guns, while there is no VAT to reclaim on key inputs such as labour, poults or feed; typically accounting for around 70% of shoot costs.
Beware the pit-falls
Even where a shoot should correctly be treated as out with the scope of direct and indirect tax, problems can arise if the organisation and structure does not demonstrate this. This can be unnecessarily costly. Likewise, if your shoot is considered a commercial enterprise within a wider estate business then you should regularly review this to ensure it is still appropriate. In defending this position, you may benefit from operating under a written business plan, while you should properly account for non-cash transactions, such as grain at nil cost from a related farming enterprise. With 30% to 40% of commercial shoots being loss making, it is better to have this discussion with your tax advisor, than as part of an HMRC inspection.
The eyes are on you
Don’t assume you are below the radar; shoots continue to be a focus of HMRC reviews. The recent guidance on beaters’ pay and wider clamp downs on shooting, suggests our sport is firmly in the authority’s eye. If you have any concerns regarding how your shoot is structured then get in contact. We carry out a housekeeping review to make sure you firmly benefit from whichever structure best suits your end goals.