Zero-rated food production and the impact on farm diversification

VAT plays a very important part in overall farm tax planning. Farmers produce food and generally that is zero-rated for VAT. However, as farm diversification increases there are more products that move away from the production of food for human consumption so farm VAT planning becomes more complicated. For example, hay sold to pets, even horses, needs standard rating. Where the farm is producing what is deemed to be "confectionery" this too will be standard rated. There have been a number of tax tribunals on the question of food versus confectionery. Many VAT advisers are of the view that the government must clarify the legislation around this difficult subject.