VATGPB8850 | Other local authority activities: miscellaneous (N to Z): smallholdings

The Agriculture Act 1970 requires smallholdings authorities (county councils in England and county or county borough councils in Wales) to provide opportunities for farming by letting smallholdings. This is subject to restrictions on tenant eligibility in the Smallholdings (Selection of Tenants) Regulations 1970. Consequently the letting of smallholdings is undertaken under a special legal regime and so is non-business.

Nevertheless the Act allows vacant smallholdings to be let for other purposes without restriction on use or tenant. Where this happens the authority does not act under a special legal regime but instead operates in the same way as any other landlord. The supplies they make are exempt from VAT subject to the option to tax.

An authority can only dispose of a smallholding if it is unused. Therefore, in the event of a sale, it is not a transfer of a going concern. This applies even if the new owner also lets the land as a smallholding since there will have been a change of use prior to the disposal. However, there will be a transfer of a going concern where an authority lets a site for non-smallholding use and then sells the freehold with the benefit of the tenant