If the taxable turnover of the non-farming part of the business is below the VAT registration threshold, the farmer may deregister and join the scheme. The farmer does not have to charge VAT on the non-farming activities, but the flat rate addition cannot be charged on these supplies because they are not designated activities.
If the level of non-farming activities is above the VAT
registration threshold, the farmer must remain registered for VAT
and will not be eligible to join the scheme unless:
: If the business is split, input tax for goods and services
bought for the farming business cannot be reclaimed through the
VAT-registered business. But the farmer may sometimes buy machinery
or equipment which has a dual purpose and will be used by both
businesses. In such cases, the farmer is only allowed to reclaim
the proportion of VAT proper to the use of the equipment by the
Where a farmer does split his activities into VAT-registered and scheme supplies you should be aware of the possibility of disaggregation (This text has been withheld because of exemptions in the Freedom of Information Act 2000).