Is there VAT on renting out farmland?
Q. I have agreed to rent a field from a farmer who is unsure whether he must charge VAT. As far as I am aware, as long as he has not opted to tax the land he does not charge VAT. Is this correct?
A. The answer here is “it depends”. It will all come down to what the land will be used for under the agreement with the farmer. For example, if he rented out the land to another farmer who wanted to keep sheep there, this would be a zero-rated supply of “grazing rights” rather than a supply of land.
Most supplies you make that involve land are exempt from VAT but there are exceptions where they are subject to 20% VAT. For example, if a farmer rents out land to campers for the pitching of tents and caravans, this income would be subject to VAT. This would also be the case if it relates to charges for parking a vehicle on the land.
Finally, any rental arrangement that is exempt from VAT must meet the conditions of a licence to occupy land, i.e. the hirer must have exclusive use of a specific area of land for a clearly defined period of time, whether that it is one day, one month or one year.
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