You have just four months to ensure your business is compliant with the government’s new Making Tax Digital scheme as Tryphena James, Promar’s
National Farm Business Accounts Manager explains. On 1st April 2019, making Tax Digital (MTD) is scheduled to go live. It is going to cause some significant and possibly substantial changes to the operations in many farm offices. If you are a VAT registered business you will have to comply. The changes are quite complex and the sooner you start assessing what you need to do the better.
The MTD VAT rules apply to the first VAT period starting on or after 1st April 2019. So for Monthly VAT the April 2019 VAT return figures will be the first to be submitted digitally. For quarterly VAT, it depends on where the VAT period starts. The first quarter which will have to be entered digitally is a VAT quarter ending on 30th June.
As the vast majority of dairy farm businesses are net recoverers of VAT, it is essential to make sure you comply with the new legislation to ensure cashflow is not affected. With around half of dairy farmers reporting VAT monthly rather than quarterly it will be essential to be ready from day one.
What do the changes mean?
- You don’t have to record anything new or different. The financial data required is the same. The content of the VAT return will not change.
- All financial information must be collected digitally on a system which is MTD compliant and enables the VAT return to be submitted automatically. You can’t keep a manual cash book and create a return manually.
- All records required for completion of the VAT return must be kept digitally on what is described as functional compatible software, which is software that will automatically link with the HMRC VAT Application Programming Interface system and update the VAT return with no manual intervention and has been approved by HMRC for the purpose.
- The VAT return must be created solely from digital records and provide HMRC with that information digitally.
- At Promar, our Farm Business Accounts (FBA) software has already been approved. However, many recording systems used on farm are still unapproved.