Make sure you take a hard look at costs, margins and VAT
With the shooting season now over and thoughts already turning to the next, landowners, shooting syndicates and shoot managers need to analyse their shoot business given the projected state of the economy and that the forthcoming season may be no better in terms of income, say Saffery Champness, Chartered Accountants.
“Some 60 per cent of shoots in the UK lost income last season and with bookings down by up to 30 per cent on some estates, we recommend that landowners and shoot managers give their shoot a ‘health check’ by taking a hard look at costs and, in particular, how VAT is treated”, says Douglas Gordon a Partner of the Landed Estates & Rural Business Group at Saffery Champness.
Douglas Gordon has listed a number of ways in which the shoot business can be planned and managed to make it as efficient as possible:-
• Revise the business plan of your shoot business by reviewing all your current activities. You should ask yourself some searching questions, such as: were paying guns really satisfied? Review you suppliers and performance in the light of other offerings and review staff skills, procedures and equipment.
• Be realistic about the coming season, the numbers of days you can sell and the cost people will pay for your shoot.
• Know your gross margin. Avoid selling days with a low profit margin, if the same effort could secure sales with higher profits. How much of a cushion do you have in your margin? If sales of guns or days don’t make much profit, even a small increase in costs or a small fall in turnover could push a business into the red.
• Be aware of the VAT position of your shoot or syndicate and the traps, including :-
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Is yours a “private” shoot or a “syndicate”? “Syndicate” means different things to different people – do you know what it means to HMRC?
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If your private shoot is unregistered and you have even 1 “let” day, you may have a VAT problem
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If you let the right to shoot over your land for no charge to a syndicate of which you are a member, you may have a VAT problem
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If you allow guns to pay their contributions to your suppliers, you may have a VAT problem
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If you let the shoot to a shoot operator in return for the provision of a few days’ private shooting, you may have a VAT problem
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Is your shoot over the VAT threshold?
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Can you structure your shoot outside of the larger estate business?
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Remember that rents paid for sporting rights whether for a day or for a longer period, are taxable at the standard rate.
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Game sold to the guns is food and is zero rated.
- HMRC charge penalties and interest on under-declared VAT and in cases where the avoidance of tax is deliberate, criminal proceedings can be brought.
Douglas Gordon says: “While getting your VAT position in order, is essential, there are some general business management measures that landowners and shoot managers should implement. For instance: making sure that invoices are all paid within deadline and monitoring the cash flow of the shoot business on a weekly basis”.
For further information, please contact Douglas Gordon at Saffery Champney via this form...
