Making tax digital - are you ready?

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At present only 11% of VAT, returns are filed using accounting software but that is all set to change on Monday 1st April 2019, when Making Tax Digital for VAT (MTD) will come into effect.

This means that all UK businesses with a turnover above the VAT threshold of £85,000 will need to keep digital records and submit VAT returns digitally.

With Her Majesty’s Revenue and Customs (HMRC), only accepting VAT returns provided via software supporting MTD for VAT farmers using electronic spreadsheets such as Excel, will need to invest in specialist accounting software or bridging software capable of sending and receiving data from the HMRC website. Those who already hold a digital submission exemption will automatically continue to be exempt.

Making Tax Digital is an HMRC initiative designed to ensure that the UK tax system is effective, efficient and supports HMRC’s plans to be one of the most digitally advanced tax administrations in the world. For many MTD will signify the end of paper based accounting but with the integration of digital record keeping and the need to submit tax data every three months this will allow business organisations to gain a much better understanding of their current financial position.

To be effective and to minimise any impact in April farmers are encouraged to start preparing for the new change immediately if they have not already done so. With HMRC, not providing free software the UFU Legislation committee would encourage those members affected by the new system to check the list of software providers working with HMRC to be compliant online at

When selecting an online accounting software package, farmers should ensure that they select a package, which will automatically calculate the value of VAT owed by their business, is able to collect data from any invoicing software already in place, updates transactions daily and creates digital records of paper receipts just by photographing them with a mobile phone.

With HMRC, only permitting one submission for each individual VAT registration number farmers who keep multiple sets of accounts for different businesses such as a farm and a diversification business will need to combine figures electronically and submit only one figure on their VAT return.

To date some farmers have expressed concern at becoming compliant with MTD and HMRC have reported that those agricultural businesses experiencing difficulties in becoming compliant may not have to do so however farmers should contact the VAT helpline on 0300 200 3700 to register such an interest. Any accountant can advise on when, and how to digitalise a paper based system, and HMRC do recognise that it will take some time for any farm business to make the transition to MTD. As a result, HMRC will not pursue filing or record keeping penalties where businesses are doing their best to comply with the law during the first year of MTD’s mandation. However, HMRC will continue to take action to safeguard VAT revenue and sanctions will remain possible in cases of deliberate non-compliance.

Anyone requiring further information is encouraged to speak with an accountant or contact HMRC directly on telephone number 0300 200 3700.