Changes to the Agricultural Flat Rate Scheme from 1st January

Below is an overview of the changes to the Agricultural Flat Rate Scheme coming into effect on 1st January 2021 from HM Revenue and Customs:

What is the Agricultural Flat Rate Scheme (AFRS)?
The AFRS is an alternative to VAT registration for businesses involved in designated agricultural activities. It is designed to offer an alternative to the administrative burden of VAT for small farming businesses.

If you register as a flat rate farmer, you do not account for VAT or submit returns and so cannot reclaim input tax. But you can charge and keep a flat rate addition (FRA) of 4% when you sell goods or goods and services to VAT registered customers.

Changes to the Agricultural Flat Rate Scheme
Entry and exit eligibility criteria based on turnover are being introduced to the AFRS from 1st January 2021.

Once the changes are implemented, businesses can join the AFRS when their annual turnover for farming activity is below £150,000 and remain on the scheme until their annual turnover for farming activity exceeds £230,000.

The purpose of the changes is:

  • To provide clear and precise rules to offer our members clarity on the scheme
  • To offer specific and focussed support for small farming businesses
  • Offer consistency with other HMRC simplification schemes

Next Steps
If you are currently a member of the AFRS, you will need to check to see if you are still eligible for the scheme when the changes come into effect. If you have become ineligible as a result of these changes, you will need to notify HMRC to be deregistered from the AFRS, and may need to register for VAT.

For more information visit the AFRS guidance available on

Frequently Asked Questions
1) What was the response to the consultation on these changes?

An informal consultation was held, and the response was broadly in favour of the changes. A query was raised around the different flat rate addition (FRA) in the Republic of Ireland (c. 6%) but there are currently no plans to amend the flat rate.

2) How many users are registered for the Agricultural Flat Rate Scheme?

We estimate there are between 1700 – 2000 users currently registered.

3) Are these changes linked to the UK Transition and other announcements on the Agricultural Transition Plan?

No. The changes to the Agricultural Flat Rate Scheme were announced in the Budget 2020 and are not linked to any other Agricultural policy decisions.

4) Is there clear guidance on the designated activities to qualify for the scheme?

Yes. Guidance is currently available on (VAT Notice 700/46) and will be updated in due course to reflect the changes coming into effect from 1 January 2021. There are no plans to amend the designated activities at this time.

5) How will these changes be communicated?

We have held several stakeholder engagement events with representative bodies and other Government departments. A press release will be issued in due course.

6) Is annual turnover calculated on a rolling 12-month basis?

No, it is calculated on a 12-month period starting from the effective date of certification, the formal point of entry to the scheme.