Making the most out of Making tax digital requirements

In little over a year’s time farming businesses not already accustomed to filing VAT records digitally will need to be ready to make the transition.

Since 2019 businesses with a turnover of more than £85,000 have had to comply with HMRC’s Making Tax Digital Rules and by next April all business - as well as unincorporates businesses and landlords with an annual income of more than £10,000 - will also be subject to the requirements.

Many businesses have already made the transition but those that haven’t will need to start keeping digital VAT records and send VAT returns using MTD compatible software.

Choosing the right accounts package, or making the most out of the one you already have, provides an opportunity to better manage your business and make key decision going forward, as well as having tax planning advantages.

All farming businesses are affected by Brexit and changes to agricultural support payments, and some will need to make changes if they are to thrive in the future. Using an accounts package will simplify record-keeping and provide you with real-time information about how your businesses is performing financially throughout the year. It will allow you to monitor cashflow and budget and help you minimise and anticipate tax bills, therefore enabling you to make well-informed business decisions.

For businesses now embarking on the digital transition, there is a wide variety of programs. Look out for those tailored for farmers, such as Farmplan, Landmark and Summit. Others have bolt-ons for farm businesses.

You will need to know if the software you choose links to HMRC, a requirement of MTD, and check if it is compatible with other systems you are using or plan to implement. Find out if it can link to your bank account and if it is cloud-based, as this will automatically back-up your data and save you having to install updates. A demo will help you explore how user-friendly it is. It is also worth considering what package will be best supported by your broadband connection.

HMRC’s aim is to make tax administration more effective and efficient; cutting down on unnecessary duplication, leaving less room for error, and making it easier for taxpayers to get their tax right. It’s clear, however, that those impacted by the changes feel challenged.

If you’d like to explore the benefits of transferring to digital or getting the most out of your existing system, our agriculture team at Armstrong Watson are here to help.