Making Tax Digital – Impact on agriculture

01 December 2016

01 December 2016 by MHA MacIntyre Hudson

Making Tax Digital is around the corner. It is hard to believe that it will happen, but it almost certainly will, and we know that the change will be momentous but don’t exactly know what that change will involve. We can be pretty certain that it will involve all businesses and landlords with a turnover of £10,000+ and that most of those will have to start doing something different in April 2018. VAT returns will come within the same process a year later and Corporation tax a year after that, so that by 2020 the whole tax system will be digital. 

We also know that the process, in its current guise, will be of little or no benefit to farming clients. The suggestion that businesses will benefit from seeing their tax liabilities starting to accrue in real time is implausible for an industry where, for many arable farmers, 80% of the income is received in 20% of the year and 80% of the costs arise in a different 20%.

Six discussion documents were issued in August and although these are still at a consultation stage, they give a fairly good idea of how the government is thinking. In summary:

  • There will be no deflection from the aims set out in March 2015. There is some talk about deferring the impact for some of the smallest businesses but it will only be a 12-month deferral. 
  • HMRC will NOT be providing software but have given assurances that software will be provided by the commercial sector
  • There will be four quarterly returns followed by an annual declaration, which is likely to be timed at a maximum of nine months after the year end. This will do nothing to help with the bunching of work which we see now.
  • There are various suggestions to reduce complexity, for example by extending substantially the cash basis limits
  • All businesses will be required to maintain their records digitally, but there is no detail as to exactly what that will mean
  • There will, naturally, be a penalty regime to enforce the new rules. Current thinking is that it will be progressive so that a number of “black marks” can be earnt before a fine is imposed, but then, rather like speeding points, these will remain on the record for some time 

It is probably too early to implement new systems, because the specifications have not yet been issued to the software houses. However farmers need to be asking themselves whether they have the expertise and confidence to deal with this themselves? Is their hardware and more importantly, broadband, adequate? If it is slow and unreliable then might they need to outsource the submission process? It is certainly worth reviewing record keeping processes sooner rather than later in order to be prepared.

If you would like further information, please get in touch with your local office or send us an enquiry.