Keep farming and contracting business seperate?

[hoff135]

I have been self employed for a long time and have a small contracting business, which is just your usual farm contracting work, 360 machine work and bits of fencing etc. I own tractors, digger, implements, pick up etc. I'm vat registered.

Dad has 350 sheep and a few cows which I'm slowly taking over.

All my gear is just at the yard which is technically his. I bought a fuel tank and I used to buy 2 deliveries then he would by one for his use but went in the same tank. All my machines get used at home.

For years I used to send him a bill for work I was doing, which was just my way of getting my share.

If I take over all the sheep and farm business should I keep the accounts seperate or not? I kind of want to keep the contracting business seperate and just leave any money it makes in there but should I then bill the farm for work I do there with machines ie. Bill myself? Theres such an overlap between the 2 it gets complicated.

Interested to see here what other farmers who have contracting businesses do?

Don't want to make things more complicated than they need be. Also if contracting side of things grow in future I might think about going limited but not looked into that.

 

[Derrick Hughes]

Go Ltd on the Contracting

 

[Grassman]

Bit pointless if there is a big overlap of machine use and purchase etc.

 

[warksfarmer]

I have been self employed for a long time and have a small contracting business, which is just your usual farm contracting work, 360 machine work and bits of fencing etc. I own tractors, digger, implements, pick up etc. I'm vat registered.

Dad has 350 sheep and a few cows which I'm slowly taking over.

All my gear is just at the yard which is technically his. I bought a fuel tank and I used to buy 2 deliveries then he would by one for his use but went in the same tank. All my machines get used at home.

For years I used to send him a bill for work I was doing, which was just my way of getting my share.

If I take over all the sheep and farm business should I keep the accounts seperate or not? I kind of want to keep the contracting business seperate and just leave any money it makes in there but should I then bill the farm for work I do there with machines ie. Bill myself? Theres such an overlap between the 2 it gets complicated.

Interested to see here what other farmers who have contracting businesses do?

Don't want to make things more complicated than they need be. Also if contracting side of things grow in future I might think about going limited but not looked into that.

Let the contracting business ‘contract farm’ the farm and go ltd.

 

[Nearly]

With red diesel being disallowed for construction it might help to have it all farm related.
Ltd co would be a touch more complicated but would protect the assets in case of feck up.
Welcome to 2021.

 

[hoff135]

With red diesel being disallowed for construction it might help to have it all farm related.
Ltd co would be a touch more complicated but would protect the assets in case of feck up.
Welcome to 2021.

Yeah hardly worth bothering is it

 

[Highland Mule]

Speak to your accountant, or if they don't give you confidence then find one who is good at tax stuff. I've definitely benefitted from having two separate enterprises (one Ltd, one S/E) and being able to optimise my affairs between them.

 

[betweenthelines]

You can't have 2 "separate" businesses for VAT as you are VAT registered as an individual.

If your turnover is so low that you are not VAT registered, I think you are wasting your time contracting. As well as competing unfairly with those that are.

 

[hoff135]

You can't have 2 "separate" businesses for VAT as you are VAT registered as an individual.

If your turnover is so low that you are not VAT registered, I think you are wasting your time contracting. As well as competing unfairly with those that are.

Yes I'm aware it goes with the person. I am vat registered and so is my father.

Cant see how being not vat registered allows you to compete unfairly with those that are since you have to fork out far more for equipment. Since nearly all my customers are vat registered anyway its just an accounting exercise tbh

 

[betweenthelines]

If most of your customers are VAT registered, surely it would make sense for you to be too?

Claim back the VAT on machinery purchases thereby reducing your costs and charge VAT which your customers claim back.

Going back to your original question about running both businesses separately, wouldn't you want to claim back the VAT on farm purchases, ergo run both enterprises as one, which I expect most farmer contractors do.

 

[hoff135]

If most of your customers are VAT registered, surely it would make sense for you to be too?

Claim back the VAT on machinery purchases thereby reducing your costs and charge VAT which your customers claim back.

Going back to your original question about running both businesses separately, wouldn't you want to claim back the VAT on farm purchases, ergo run both enterprises as one, which I expect most farmer contractors do.

I am vat registered and have claimed back vat on all the machines I've bought

 

[ploughman1963]

I have been self employed for a long time and have a small contracting business, which is just your usual farm contracting work, 360 machine work and bits of fencing etc. I own tractors, digger, implements, pick up etc. I'm vat registered.

Dad has 350 sheep and a few cows which I'm slowly taking over.

All my gear is just at the yard which is technically his. I bought a fuel tank and I used to buy 2 deliveries then he would by one for his use but went in the same tank. All my machines get used at home.

For years I used to send him a bill for work I was doing, which was just my way of getting my share.

If I take over all the sheep and farm business should I keep the accounts seperate or not? I kind of want to keep the contracting business seperate and just leave any money it makes in there but should I then bill the farm for work I do there with machines ie. Bill myself? Theres such an overlap between the 2 it gets complicated.

Interested to see here what other farmers who have contracting businesses do?

Don't want to make things more complicated than they need be. Also if contracting side of things grow in future I might think about going limited but not looked into that.

Exactly the same situation ask was in years ago. I treat it all as one account and am not aware of any reason that I would have been better to separate them. Borrowing on the back of a successful contracting business to fund farm expansion certainly Magdeburg life easier

 

[Chae1]

Let the contracting business ‘contract farm’ the farm and go ltd.

This is what we have done.

 

[Oscar]

Only thing to watch ( I m doing same as you by the way) is that as a farmer you can do 5 yr averaging of profits/ losses but not contracting so if the contracting is making money and the farm is only just breaking even say , technically (if the accountant is following the law) even if you run one buisness, one a/ c one vat number , the profits/ losses should be treated separately .
My case , all run through farm a/c , that contracting initially was smaller than farm turnover wise but then grew to same plus another diversification kicked in which has meant that farm is only 40 % of turnover now so last couple years I have not been able to do 5 yr averaging.

 

[Flat 10]

This is what we have done.

Why? There must be a reason.

 

[hoff135]

At the very least if I keep it all as one business I could have a seperate bank account for the farm and one for the contracting side. Keep seperate records for both but class it as one for tax purposes?

It was just a way of making it easier to keep tabs for each business as it were.

I sort of want them both to pay their own way, in fact I was going to leave all the money the contracting makes in that account so I can expand it.

Also don't want to see for example, the wool cheque being used to buy new tractors for contracting etc.

 

[Highland Mule]

Also don't want to see for example, the wool cheque being used to buy new tractors for contracting etc.

You’re safe on that one.

 

[benny6910]

When you say slowly taking over do you mean you are just doing the work or are you getting shares in the farm?

 

[hoff135]

When you say slowly taking over do you mean you are just doing the work or are you getting shares in the farm?

Not sure what father is planning. So far all I've done is bill him or work. But he wants me to have the sheep and he has the cows. Not sure how he wants to claim for subs. Need to work that out

 

[Henarar]

Only thing to watch ( I m doing same as you by the way) is that as a farmer you can do 5 yr averaging of profits/ losses but not contracting so if the contracting is making money and the farm is only just breaking even say , technically (if the accountant is following the law) even if you run one buisness, one a/ c one vat number , the profits/ losses should be treated separately .
My case , all run through farm a/c , that contracting initially was smaller than farm turnover wise but then grew to same plus another diversification kicked in which has meant that farm is only 40 % of turnover now so last couple years I have not been able to do 5 yr averaging.

This more or less
Run it together and the accountant will separate what needs separating
Was in the same boat as the OP and we put the two business farm and contracting in to one and made savings on a few things like insurance and accountancy