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