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20 October 2009
Issue: 4228 / Categories: Forum & Feedback , VAT
If a farmer’s wife carries on a bed and breakfast business from the farm premises, can this be treated as a separate business from that of her husband?

Our farming clients are being targeted by HMRC who consider that VAT should be levied on income from bed and breakfast or self-catering even though these businesses are genuinely operated by the farmers’ wives.

In these cases the husband has no involvement whatsoever with the wife’s business. There are separate bank accounts and annual accounts and tax returns are prepared.

However HMRC take the view that (whether the farm is a sole trade or a partnership) if a farming asset is being used by the spouse without a formal business agreement in place then they can attack the transaction as business splitting.

Assessments in the order of £10 000 have been raised on clients. This is obviously a significant outlay which in many cases can only be paid by taking out further loans.

It does not seem right that HMRC insist on separate income tax returns...

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