Making Tax Digital For Farmers
Making Tax Digital (MTD) is fast-approaching for many, comes with penalties for those that don’t comply and involves big changes for most enterprises out there. But what is it, how does it affect finance operations for farmers and rural enterprises and how can they prepare?
You may have heard at least a little bit about the Making Tax Digital mandatory government initiative this past year, which aims to make UK one of the most digitally-advanced tax administrations in the world. If not then read on. ‘Making Tax Digital’ or MTD represents a BIG change to how we will record our financial information and submit tax returns.
The scheme promises to make tax admin more effective, efficient and easier to get right, through businesses adopting compatible software to manage tax affairs with HMRC. In other words, you need to be planning to move to cloud accounting software, if you are not already doing so.
All VAT companies over £85k turnover threshold will have moved to digital tax, as the deadline for these businesses was last year. Remaining VAT-registered businesses, with taxable annual turnovers below £85k, need to comply for April 2022. Making Tax Digital for Income Tax will be introduced in 2023. Anyone non-digital with taxable annual turnovers of over £10k, will need to comply by April 2023. It’s advisable all types of businesses act soon, to avoid a bumpy ride and benefit from cloud.
The challenges and benefits for farmers?
Each sector is different and within the farming sector, the problems are often similar. Elin Childs, Farming Pod Leader at LHP Accountants explains, ‘Our LHP farming pod specialises in helping farmers overcome digital pitfalls so they can thrive, adapt and grow. Often, initial problems for farming enterprises involve the challenge of setting up Wi-Fi to run cloud accounts. We can help source funding for WIFI masts, which then makes cloud possible.’
A common obstacle for farmers in adopting cloud, is lack of IT skills or confidence to switch to managing digital accounts. Elin notes, ‘our cloud software trainers help farmers learn cloud software from scratch’, she remarks, ‘clients note how easy the switch was and that they wish they’d made the move years ago. The farming pod at LHP can also manage finances for farmers, or a bit of both.’
Although it’s mandatory to become digital with tax, there are benefits in going digital. Elin notes, ‘our team often helps farmers with software that connects them to platforms, in order to run their farm more efficiently. For example, for benchmarking, or to connect direct to data on livestock cattle numbers on a smartphone. Another benefit lies in the ability to create reports on pence per litre, £ per head, £ per hectare, via information held on software the cloud system connects to.
Many LHP farming clients note how up-to-date information allows accounts preparation to be prepared quicker for the following year-end, due to real-time data. Elin points out ‘management accounts can be prepared prior to year-end, and tax planning options for the upcoming year can be explored, saving time and money. Our farming pod accountants know all the ways in which to help.’
Associate LHP Director Lisa Oliver explains ‘being digital means being more efficient, making better choices through instant insights and increased convenience. Because the cloud gives control of real time insights, this allows farming clients to make timely decisions that help them grow.’, she adds ‘having grown up on a farm myself and with 15 years’ experience specialising in agriculture, I’m well-placed to advise, so please don’t hesitate to get in touch.’
LHP works closely with the farming community, to discuss approaching rules and to demonstrate software ease of use. As Xero Platinum Partners we know cloud does make life simpler, more convenient and can save time and money. At LHP, we teamed up with major cloud software providers – Xero, QuickBooks and Sage – to provide clients with best-in-class, fully-compliant accounts.
Our recommended cloud software brings:
• a clear view of your finances, ‘any time, any place’
• ability to run your farm on the go, on any device
• automatic recording of bank receipts and payments in real-time
• smartphone photos of purchase invoices/expenses easily posted to app
Making tax digital is mandatory, but we’re best-placed to assist you smoothly through this transition, so do not worry! If your accountant has not spoken to you about Making Tax Digital, or you wish to speak to specialists prior to the deadlines, please get in touch with our farming pod! You can email email@example.com or ring 01267 237534.