The government has announced new entry and exit rules for the VAT agricultural flat rate scheme (‘AFRS’) resulting from informal consultations with businesses and their representatives in 2019. The amendments to the legislation will be as follows:
- businesses can join the AFRS when their annual turnover from farming related activities is below £150,000;
- businesses must notify HMRC once their annual turnover from farming related activities exceeds £230,000, to be deregistered from the scheme and register for VAT instead;
- businesses with turnover that exceeds £85,000 from non-farming related activities will still be required to register for VAT and will be ineligible for the scheme.
Any farmer who carries out designated production activities. Farmers who are eligible to use the AFRS will still be required to monitor their non-farming related turnover to confirm this does not exceed the VAT registration threshold. If this is breached they will still be required to leave the AFRS.
Amendments to the legislation will be implemented from 1 January 2021.
This announcement makes the entry and exit threshold for the AFRS consistent with the threshold of the regular VAT flat rate scheme. However, it is unlikely that this amendment will impact a large number of traders, as businesses with turnover in excess of the new exit threshold do not usually benefit from the scheme and are therefore typically already VAT registered.