Farmers urged to prepare for digital VAT switch

Farm businesses are being urged to ensure they are prepared for a switch to digital VAT submission in the spring

Making Tax Digital for VAT is due to be mandated with effect from April 2019 for businesses with a VAT turnover exceeding £85,000. HMRC has announced that it will be communicating with all such businesses in the next few weeks. Businesses in this position are therefore being urged to ensure they are prepared.

A voluntary pilot study is underway, but there will be limited opportunities for farm businesses to join as it cannot currently accept repayment cases or partnerships.

The NFU said digital accounting records can provide farm businesses with easy and fast access to data and reports which can be extremely useful. For businesses already using such software, or in the process of choosing such software, it is hoped that business benefits can be derived from it in addition to complying with Making Tax Digital legislation, it said.

However, the NFU has always argued against a mandatory approach stressing that a voluntary approach allows a more phased way of bringing businesses into the digital age, at a pace which suits them and if and when they can see real business benefits in doing so.

The NFU expressed concern about how those facing ‘digital exclusion’ will cope. It said: “If the consequences predicted in the report are to be avoided it is, in our view, essential that HMRC now communicate how it will assess claims for exemption due to digital exclusion and what it will do to directly support those businesses which require additional support in moving to digital record keeping.”

It added that many farm businesses will need more time and that HMRC must now carefully consider how to avoid making compliant businesses non-compliant.

HMRC is maintaining that MTD for VAT will be mandated from April, despite concerns raised in a House of Lords Economic Affairs Committee report about the timetable. The report was also critical of HMRC for its approach in supporting smaller businesses with Making Tax Digital.

HMRC is, however, pausing further development of MTD for income tax and corporation tax to allow it to direct resources towards Brexit matters, an announcement that will be of some relief to many farm businesses.

NPA chairman Richard Lister, who recently attended a meeting on the switch, said: “We share the concerns about the challenges the new system could create for farm businesses and reiterate calls for the pilots to fully assess the issues that might arise for taxpayers.

“But there is no doubting the Government’s intentions. So we urge members to make sure they take the necessary steps to prepare, including contacting their financial advisor or accountant.”

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Editor of LBM titles Pig World and Farm Business and group editor of Agronomist and Arable Farmer. National Pig Association's webmaster. Previously political editor at Farmers Guardian for many years and also worked Farmers Weekly. Occasional farming media pundit. Brought up on a Leicestershire farm, now work from a shed in the garden in Oxfordshire. Big fan of Leicester City and Leicester Tigers. Occasional cricketer.