Revenue Tax Briefing Issue 27, August 1997
Until the enactment of this legislation, people operating garden centres could qualify as flat-rate farmers and accordingly did not need to charge VAT on their sales of horticultural products. This treatment dates from the early 1980s when the Appeal Commissioners decided that the tending of plants was an agricultural activity.
However, these garden centres were supposed to register for all their sales if their sales of garden tools, sheds and other non-horticultural products exceeded the goods registration threshold of £40,000 per annum. To avoid having to charge VAT on their sales of horticultural products, it had become common for urban garden centres to split their business into an unregistered farming company selling plants and a registered retail outlet selling other goods.
Accordingly, Section 101 of the Finance Act introduces a new Section 8(3)(a) into the VAT Act to provide that a farmer whose retail sales of horticultural products exceeds, or is likely to exceed £40,000 per annum is a taxable person and must register and account for VAT.
The section also ensures that a farmer is subject to the £20,000 VAT registration threshold where he supplies a combination of retail horticultural products and agricultural services.
Subsection (b) of Section 101 also adds a new sub-paragraph to the proviso to section 8(3). This amendment means that if a retailer of horticultural products breaks his operation into smaller units for the purpose of remaining under the VAT registration threshold, the various units can be grouped for VAT purposes. This grouping provision also applies to agricultural contractors.
Finally, Section 113 will reduce the rate of VAT on horticultural products from 21% to 12%. The reduced rate will apply to nursery or garden centre stock consisting of live plants, live trees, live shrubs, bulbs, roots and the like, and cut flowers and ornamental foliage (other than artificial or dried flowers or foliage)
The above changes come into effect from 1 September 1997, as a result of a Ministerial Order dated 14 July 1997 (S.I. No. 313 of 1997).
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