Farmers and rural businesses will have to keep all their VAT records and submit returns online from April 2019. But while Government plans to Make Tax Digital could prove challenging and time-consuming, it also offers a great opportunity to improve budgeting and business management.
“While it’s easy to see digital tax returns as an administrative burden, the new technology actually offers many advantages,” explains Daisy Johnston at accountant Old Mill. “Clients who have already moved their accounting online have benefited from real-time cash flow control, reduced paperwork, and greater opportunities for tax saving measures.”
Government plans to introduce digital self-assessment returns – originally set for 2020 – are likely to be delayed by Brexit. However, the trend is clear – and businesses might do well to embrace the change sooner rather than later, she adds.
Old Mill recommends farmers start preparing now and is holding Making Tax Digital clinics to help clients come to terms with the changes and treat this as an opportunity to improve their businesses. So who does it affect?
“The first phase, from April 2019, affects all businesses with a turnover above the VAT threshold – currently £85,000,” says Mrs Johnston. “Most businesses have submitted their VAT return electronically for several years, but once Making Tax Digital is introduced, the records for the underlying transactions will also need to be maintained electronically, which will require a change in process for many businesses.”
At this stage HMRC doesn’t offer free software, so businesses will have to use third-party software – and Old Mill has joined forces with Xero to offer a complete package for its clients. “Xero is extremely user-friendly, helping with budgeting, invoicing, payroll and VAT returns – it makes the whole process straightforward and transparent,” says Mrs Johnston.
“VAT registered businesses with a turnover below the registration threshold can opt to take their information online if they wish – and given the management benefits of doing so, we would suggest that may be a good move,” she adds. Businesses will still be able to use the flat rate scheme and can submit monthly, quarterly or annual returns as before.
One farmer who has already made the move is Old Mill client and dairy farmer, Joe Carter from Chippenham, Wiltshire. He explains: “It has really helped us save time, reassuring us that our cash flow is good, as well as making it easier for us to have a full, transparent view of our finances.”