The importance of record keeping

Firstly, the farm family need to know throughout the year the financial performance of each enterprise on the farm.

It is necessary to know both actual costs and the trends of costs and income.

This is the only way that the farm can manage its banking facilities and to know, as early as possible, if a discussion is required with the bank, in order to maintain a positive business relationship with no surprises.

Secondly, from a tax point of view, up to date record keeping and the preparation of year to date figures enable an informed conversation to be held with the accountant.

This discussion, informed by year to date profit and loss information enables a good estimate of the projected tax liability for the current year.

This exercise will lead to a discussion of tax planning opportunities which may be able to be implemented before the end of the current tax year.

Examples include wage to family members working on the farm; training allowance for a daughter or son attending a third level course directly related to parents’ trade; profit averaging for sole traders or partners in a partnership; incurring necessary repairs or capital expenditure.

Thirdly, up to date record keeping facilitates succession planning in that profit trends and cash surpluses and deficits are highlighted.

This is valuable information to enable the next generation to be informed.

An accurate and up to date record keeping system gives confidence to the next generation joining the business that enquires from HMRC can be effectively handled.

Sole traders and partnerships who currently do not prepare annual accounts to the 31 March or 5 April will be required to do so from April 2024.

The current year 2023-24 is a transition year.

Up to date record keeping will make the transition to 5 April or 31 March year end easier.

In addition, the introduction of digital filing for sole traders and partnerships from April 2026 will require up to date record keeping.

From this date, quarterly returns of income and expenses must be filed with HMRC.

The increasing demands of farm quality assurance standards coupled with carbon audits, soil sampling and animal health and welfare make up to date record keeping a necessity to ensure farm sustainability. There are many bookkeeping and recordkeeping options available.

A discussion with the farmer’s accountant will assist in making the appropriate choice.

For further information, telephone (028) 82241515.

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