Farmers must embrace digital tax scheme as an “opportunity rather than an imposition”
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The implementation of the Making Tax Digital scheme in April should be seen as an 'opportunity rather than an imposition' writes Anglia Farmers' head of engagement WILL SOMMERVILLE.
Making Tax Digital (MTD) is HMRC's flagship programme to 'digitise VAT'. It means that from April 2019, businesses with a turnover of more than £85,000 will have to submit their VAT returns through compatible accounts software.
For the estimated 75% of farm businesses who are keeping manual records, this will mean investing in new software. Such an investment requires a clear understanding of the impact of the changes MTD will bring and whilst businesses vary from farm to farm, we have highlighted four key facts all businesses need to be aware of:
• There will no longer be the option to use a paper-based recordkeeping system to calculate the amount of VAT owed before submitting a paper return or manually entering calculations on the HMRC website.
• Farms using electronic spreadsheets, such as Microsoft Excel, will also have to invest in specialist accounting software or bridging software (a tool to transfer data from one place to another) as, after the change, they will be the only products capable of sending and receiving data from the website.
• HMRC has made it clear it will not be providing free software for users to make VAT submissions.
• Only one submission will be allowed for each individual VAT registration number. This means companies that keep multiple sets of accounts for different businesses – for example, a farm and a diversification enterprise – will need to combine them into one figure for their VAT return. Farmers and bookkeepers should be aware that not all software has this capability.
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Change can sometimes cause tension and whilst it may be that some businesses will feel forced into investing in software in order to remain compliant, long-term businesses will benefit from financial savings and improvements in efficiency.
As such, MTD should be seen as an opportunity rather than an imposition, allowing businesses to not only remain compliant, but also help them a adopt a more analytical approach to understanding their costs which will help ensure they remain competitive.