Farmers and e-invoicing: flat rate scheme, self-billing and 2029

Farming has some of the oddest invoicing rules in UK VAT, and the 2029 mandate does not yet say how it will deal with them. VAT-registered farms selling standard-rated goods or services to VAT-registered businesses can expect those VAT invoices to need to be e-invoices from April 2029. Flat rate farmers are not VAT-registered, and much farm produce is zero-rated, and those positions are not yet confirmed. Here is what applies today and what to watch.

Flat rate farmers: not VAT, but invoiced like VAT

The Agricultural Flat Rate Scheme (VAT Notice 700/46) is an alternative to VAT registration. A certified flat rate farmer:

• does not register for VAT, submit VAT returns or reclaim input tax
• can add a flat rate addition (FRA) of 4% to sales of qualifying goods, or goods and services, to VAT-registered customers, even where the sale would be zero-rated
• keeps the FRA, which compensates for input tax that cannot be reclaimed

HMRC is explicit that "the flat rate addition is not VAT". But the customer treats it as input tax and reclaims it on its VAT return. To do that, it needs an invoice.

What an FRA invoice must show

Required detail	Note
Identifying invoice number
Flat rate certificate number	Instead of a VAT number
Farmer's name and address
Customer's name and address	Must be VAT-registered
Date of sale
Description of goods or services
Price excluding the FRA
Rate and amount of the FRA	4%

The FRA must not be charged on sales of machinery, of land, or of repairs and maintenance to other farmers' buildings. It must not be charged to customers who are not VAT-registered, or to other flat rate farmers.

Why FRA invoices are hard to fit into Peppol

EN 16931, the standard behind Peppol BIS Billing 3.0, has no concept of a flat rate addition. Its rules for standard-rated and zero-rated lines require a seller VAT identifier (BR-S-02, BR-Z-02), which a flat rate farmer does not have. An FRA could be shown as a charge or with a "not subject to VAT" code, but then the buyer's software would not treat it as reclaimable input tax.

Not yet confirmed:

• whether FRA invoices fall within the mandate at all
• if they do, whether the UK specification will add a code or field for the FRA
• whether customers will need an e-invoice to reclaim the FRA

Customers reclaim FRA as input tax, so this matters to buyers as much as to farmers. The scheme has entry and exit limits: you can join with farming turnover below £150,000, and must leave above £230,000. That means many FRA users are small businesses.

VAT-registered farms: zero-rated produce

Most food and animal feed is zero-rated. VAT Notice 700 (16.2.1) says VAT invoices are needed for standard- and reduced-rated supplies to VAT-registered customers, and "you do not, therefore, have to issue VAT invoices for zero-rated supplies".

The headline policy is that all VAT invoices must be e-invoices. If you do not have to issue a VAT invoice today, it is not yet confirmed whether you will need an e-invoice for that sale in 2029. In practice, many farms issue full invoices for zero-rated sales anyway, because buyers want them. Treat those as likely to move to e-invoicing. Standard-rated farm income will need e-invoices like any other business: contracting, machinery hire, diversified activities and many services.

Self-billing: the norm in parts of farming

In milk, livestock, grain and fresh produce, the buyer often prepares the invoice. A dairy processor or co-op calculates the price from volume and quality, then issues the invoice with payment. That is self-billing, governed by VAT Notice 700/62:

• There must be a written agreement with a start and end date, and it should be reviewed (HMRC advises every 12 months).
• Each invoice is marked "SELF-BILLING". HMRC advises adding "The VAT shown is your output tax due to HMRC".
• The self-biller must not self-bill a supplier who is not VAT-registered under a VAT self-billing arrangement.

Notice 700/46 also lets a customer prepare an FRA invoice for a flat rate farmer, if the self-billing conditions are met. The scheme sets other rules for farmers' groups and co-operatives, where the group pays the FRA out to certified members, and for auctioneers, depending on whether they act in their own name under the Auctioneers' or Margin Scheme.

Self-billing and Peppol

Peppol publishes a BIS Self-Billing 3.0 specification, in which the buyer sends the self-billed invoice to the supplier. HMRC's consultation response says concerns about self-billing have been addressed in other countries' mandates. The UK rules have not been published, including whether the self-billed farmer will need its own Peppol connection to receive them. See self-billing and e-invoicing.

Northern Ireland farms

A Northern Ireland flat rate farmer can charge the FRA on agricultural produce sold to a VAT-registered customer in an EU member state, and that customer can reclaim it. NI businesses trading goods with the EU may need XI-prefixed VAT numbers. See Northern Ireland and XI VAT.

Summary

Farm situation	Today	2029 position
VAT-registered, standard-rated sales to VAT-registered businesses	Full VAT invoice	In scope
VAT-registered, zero-rated produce	VAT invoice not required	Not yet confirmed
Flat rate farmer charging FRA	FRA invoice	Not yet confirmed
Self-billed by buyer	Self-billed VAT invoice under agreement	Expected to continue; UK rules not yet published
Not registered, not on the scheme	No VAT invoices	Sending: unlikely to apply. Receiving: not confirmed

What to do now

1. Work out your mix: FRA sales, zero-rated sales, standard-rated sales and self-billed income.
2. Check your self-billing agreements are current. Mandate or not, they are a legal condition.
3. Ask your buyers (processors, co-ops, auction marts) how they plan to self-bill electronically.
4. Talk to your accountant about whether staying on the flat rate scheme or registering for VAT suits you once the rules are published. This guide is not tax advice.

Follow the timeline for the Budget 2026 roadmap (28 October 2026), and see the small business guide.