'A challenge for the rural sector': Farmers urged to be ready for Making Tax Digital

MTD will entail keeping records digitally with the prospect of submitting a quarterly summary to HMRC
MTD will entail keeping records digitally with the prospect of submitting a quarterly summary to HMRC

In just over 12 months it is expected that the first phase of HMRC’s Making Tax Digital (MTD) project will come on stream.

Unlike previous major national initiatives however, it has been proposed that MTD will hit smaller businesses first, except those with turnovers below £10,000 per annum that will be exempt.

MTD will entail keeping records digitally with the prospect of submitting a quarterly summary to HMRC and a separate annual submission finalising annual tax figures within 9 months of year-end.

Subject to confirmation, it is understood that unincorporated businesses will be first into the new reporting regime with MTD for income tax for them set to kick in from 6 April 2018 although there has been discussion for deferral for the smallest businesses – those above the £10,000 exemption – for one year.

VAT reporting for unincorporated businesses and companies will fall within MTD from April 2019, and corporation tax from April 2020.

Farmers have said the HM Revenue and Customs initiative to make tax digital will be difficult for businesses in the countryside without fast and reliable broadband.

Penalties

Coll Murchison-MacDonald, Partner in the Inverness office of Saffery Champness, said the new regime may present a challenge for many rural businesses, and particularly those that do not currently keep their own accounting records using dedicated software.

He said: "There is also a lot of detail missing at the present time and, despite the tight timeframe, we are still very much waiting for further announcements.

"Ongoing consultations have set out how MTD will work for straightforward unincorporated businesses including simple partnerships, but there are still a lot of holes in what we actually know and what we are facing.

"If we accept that MTD is coming next year then general advice to all businesses at this time should be to assess current record keeping and tax compliance processes and identify whether any new software, or the hardware to run it, is needed.

'Fast and reliable broadband'

CLA President Ross Murray said farmers' and rural businesses have worries over Making Tax Digital.

“We raised concerns over the way the project might be rolled out as it would be difficult for businesses in the countryside without fast and reliable broadband to comply by the 2018 start date.

“The Government must reassure rural businesses they will not be unfairly penalised as a result of poor connectivity when trying to complete and submit tax information online.

Mr Murray concluded: “Consulting with rural businesses on the timescale and cost implications of the project if the free software available is not suitable for farm businesses or partnerships, and implementing in phases will help the Government ensure tax compliance is achieved and avoid throwing the rural economy into chaos.”