AHDB VAT Status - Statement

To our intense frustration and disappointment, Her Majesty’s Revenue and Customs (HMRC) has ruled that AHDB levies are outside of the scope of VAT, with effect from 1 April 2022.

This issue has been under consideration ever since AHDB was created, in 2008. Since that time we have always charged VAT on levy invoices and recovered input VAT on all goods and services paid for by the levy.

HMRC notified us of its formal decision to change our VAT status in October 2020, since which time we have been, with staunch support from Defra, arguing hard against the decision and asking for the formal review of its decision through HMRC’s own internal appeal processes. While we will continue to press our case, but with no sign of a change of heart from HMRC we must now notify levy payers, and the processors and auction marts who collect the levy on our behalf, so they can be ready for the change on 1 April 2022.The net impact to AHDB could be approximately £4 million on the VAT it will no longer be able to recover on the goods and services it purchases on behalf of levy payers. This means AHDB’s buying power will be reduced by approximately nine per cent.

AHDB has made an application to HMRC to be included as a section 33 body entitled to recover some elements of VAT in relation to its non-business activities, which would reduce the impact.

Nicholas Saphir, AHDB Chair, said: “This decision by HMRC is infuriating for AHDB and will rightly anger our levy payers, particularly at a time of such change and uncertainty being faced by farmers.

“This decision will punish levy payers at a time of considerable farming need. It is inexplicable.

“Ever since AHDB was formed we have maintained that we should be entitled to recover VAT and we will continue to fight to try and achieve this. We also have had the support of Ministers in Defra, Scottish Government and Welsh Government in our bid for Section 33 status. They recognise the potential impact on levy payers and I am very grateful to them.

“Our work towards Section 33 recognition - in parallel with a possible appeal through a tax tribunal - has no guarantee of success. In the meantime, HMRC has instructed us to implement its decision and we must comply or face penalties.

“All our 2022/23 budgeting has now been re-calculated on the basis of us not being able to recover VAT. We have left announcing this until the last practical moment because of our ongoing discussions with HMRC and our hope that it wouldn’t reach this point.

“I have no doubt many levy payers will wish to express their feelings directly to ministers at the Treasury.”