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Many East Anglian farmers are ill-prepared for digital tax switch, says leading accountant

PUBLISHED: 09:30 06 May 2018 | UPDATED: 09:57 06 May 2018

Chris Solt, of accountancy firm Lovewell Blakes agricultural services department.

Chris Solt, of accountancy firm Lovewell Blakes agricultural services department.

Lovewell Blake

A worrying proportion of farmers are nowhere near ready for a forthcoming switch towards computerised tax records, according to a leading East Anglian farm accountant.

While March 2019 will see the UK’s departure from the EU, the following month will herald another major change which accountants argue could have a bigger immediate effect for agricultural businesses.

Under the government’s Making Tax Digital (MTD) initiative, from April next year, all VAT-registered businesses with turnover above the registration threshold will have to submit their accounting records, along with their VAT return, using computerised software.

And with as many as one in five small farm businesses still relying on manual bookkeeping, the sector is one of the least prepared for this mandatory change said Chris Solt, who leads Lovewell Blake’s agricultural services department.

“In many ways a good set of manual records is far better than a bad set of computerised records, but HMRC is forcing all businesses to make the move to cloud-based accounting,” he said. “Although there will not be any further changes to MTD for businesses until 2020 at the earliest, it is their ultimate aim that all businesses will be required to keep digital records and make quarterly reports. There is no option about this – so those agricultural businesses still relying on manual bookkeeping need to be planning for the change right now.”

Mr Solt said the changes should also make it easier for tax officials to conduct spot checks on businesses, which could be helpful for farmers.

“For example, if a farm business has invested in an expensive new piece of equipment that would give rise to an exceptional refund request on the VAT return; this might in the past have triggered a full VAT inspection,” he said. “With the new system, HMRC will be able to examine the records online and see the expenditure in the accounts, hopefully negating the need for the inspection.

“Although we have to acknowledge that there is some pain involved in making the transition, cloud-based accounting brings lots of other benefits for farmers as well, such as being able to keep tabs on their business far more easily and, ultimately, saving lots of time which manual and spreadsheet systems entail. So to some extent agricultural businesses should be viewing MTD as an opportunity rather than a burden.

“It is generally those farms run by the older generation which have resisted the move to cloud-based systems, so perhaps now is the time for those businesses to involve the next generation to help make the move. Certainly many of those currently not on cloud-based systems will need help to make the move, whether from younger members of the family, farm secretaries or their accountants.

“We will have to wait and see whether HMRC’s IT systems cope with the increased data being submitted, but we can hope that it speeds up improvements in rural broadband, as good online capability is essential for these proposals to work.”


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