Making Tax Digital is on the horizon, but are agriculture businesses in remote locations ready for the change? Committee members Gary Brockway and Timothy Evans contribute to the discussion on making VAT digital.
Gary Brockway, Partner, Baldwins Accountants
A report by the National Farmers’ Union (NFU) earlier this month has laid bare how some farmers are being left behind as technology is changing the way firms do business.
At the start of 2018, the NFU published their broadband and digital member survey which found that although 89 per cent of farmers agreed that a good broadband connection was essential for their business, 45 per cent admitted that their current internet speed isn’t fast enough to fulfill their needs.
The findings are particularly pertinent given that agriculture businesses above the £85k VAT threshold are required to start reporting their VAT digitally by 1 April – yet how can farmers manage their accounts digitally in the cloud if they have unreliable, slow or no access to internet?
Thankfully HMRC has made an exception to those farmers who are in remote locations and have poor or no broadband connection but, nevertheless, it’s likely that there will be other agricultural firms still concerned about relying on an unreliable broadband connection to abide by the law and submit their VAT digitally.
There are three key approaches that agricultural businesses can take to allay their fears if they are battling poor home broadband connections:
- Use digital accounting software on a desktop PC that allows data to be inputted offline, and only requires an internet connection during the submission of data, which only needs a low upload speed rather than download speed. Types of software include Sage 50, Farmplan and Landmark.
- Use 4G mobile data to submit data via the cloud. While this works for some businesses, equally these connections in the countryside continue to be unreliable. Before going down this route, it is worth checking with the network operator on the level of coverage in any given region.
- Employ an accountant to carry out bookkeeping services on their behalf – this removes the worry around unreliable broadband possibly landing you in trouble with HMRC for filing late accounts.
Improvements, albeit slow, are being made to superfast broadband connections across the UK, with access to these services increasing from four per cent in 2015 to 16 per cent in 2018.
This is essential progress if agricultural businesses are going to develop their businesses in the years ahead, whether it is using technology for diversification, marketing activities or improving efficiencies behind the scenes.
You can read the full NFU survey here.
Timothy Evans, Director, H. D. Pritchard
Making Tax Digital for VAT, which I prefer to address as “Making VAT Digital”, hereinafter MVD, is fast approaching. It is worth remembering that National Subsidies receivable, especially the Basic Payment, are outside the scope of VAT.
In my experience some farmers who prepare their own VAT have recorded the subsidy in box 6 of the VAT return as either a zero rated sale or an exempt one.
HMRC may be using incorrect data when they determine if a business shall be brought into MVD. Often small “family” farmers’ taxable, “vatable” turnover will be under the VAT threshold of £85,000 but it is possible incorrectly recorded subsidy in previous periods may bring farmers into MVD unnecessarily. It is certainly time to start asking clients if they have received a notice from HMRC regarding MVD and checking if the information HMRC hold is correct.
Furthermore I doubt farmers shall be successful in claiming an exemption from MVD as “digitally excluded” – on the basis of age, location etc if they currently report electronically to the British Cattle Movement Service (BCMS)?
Contact the authors
Gary Brockway Partner at Baldwins, Derby.
For more information please call 01332 360808 or 07966379885 or get in touch via LinkedIn for an informal discussion on Making Tax Digital and the solutions Baldwins can offer for your business.
Timothy Evans BSc (Hons) FCA CTA Director at H D Pritchard & Co