Farmers may struggle to cope with digital VAT changes


Serious concerns have been raised about how farming businesses will cope with the mandatory digitalisation of VAT returns. John Robson explores the issues.

Many farmers are worried about the impact of new regulations that mean all businesses whose turnover exceeds the VAT threshold must complete their returns online.

The changes, which will be implemented from April 2019, mean farming businesses need to make sure the software they use to file their VAT returns complies with HMRC’s ‘Making Tax Digital’ system.

Why people are worried about the new system

Under the existing regime, VAT can be calculated on paper before the final figures are submitted on the HMRC website. This option will no longer be available for farmers above the VAT threshold – unless they can claim an exemption.

Many members of the agricultural community are worried that elderly farmers in particular will struggle to cope with the new set-up because they may not be internet-savvy or they live in areas with poor broadband.

Among those concerned is the NFU, which has pointed out that five per cent of the population does not have access to high speed broadband.

Moreover, the NFU correctly emphasises that farm businesses have often diversified, with complex accounting and taxation affairs that are not easily compatible with the new ‘one-size-fits-all’ system.

Survey shows farmers are not ready for digitalised VAT

These concerns are underscored by a survey indicating that one in five farmers does not know what HMRC’s ‘Making Tax Digital’ system is.

The survey, conducted by financial advisers, also reveals that 44 per cent of farmers who are aware of the changes have not looked into the implications for their businesses.

Meanwhile, it is estimated that no more than a third of farmers currently use accounting software.

Exemption system baffles elderly farmer

HMRC has announced exemption criteria for businesses that are genuinely unable to comply with the new digital system. However, anecdotal evidence suggests that elderly farmers in particular are concerned about how the exemption process will work.

One farmer in his 70s told Farmers’ Weekly that he contacted HMRC to request exemption, but was told that officials were still working out the exemption procedure.

For its part, HMRC insists the exemption system is now operational and will make allowances for farming businesses that are genuinely unable to go digital due to factors including age, disability, and remoteness of location.

Farmers who think they could be exempted are urged to contact HMRC’s helpline on 0300 200 3700.

Must know info

It is important to keep in mind that farmers who use electronic spreadsheets, such as Microsoft Excel, will also have to buy specialist accounting software, or bridging software – an electronic application that transfers data from one location to another.

Particular care will need to be taken where there are multiple income streams which are currently dealt with through a single VAT registration number.

Farmers should also be aware that HMRC will not provide free software for the purpose of submitting VAT returns. Accounting software companies that are working with HMRC to be compliant with the new system are listed at:

Robson & Liddle offers a farm secretarial and bookkeeping service which only requires the rural business owner to pass their information to the office where their bookkeeping can largely be done for them.