Derek Petrie, director of audit and accounts at Aberdeen-based independent accountancy firm Hall Morrice
The move to Making Tax Digital for VAT (MTDV) has been a revolutionary step into the future for the filing of VAT returns. No longer does HMRC accept paper-based records – businesses with a taxable turnover higher than £85,000 now make returns on a digital platform.
It’s been a testing time for those in business, regardless of their scale or the industry they operate in, as they adapt to taxation in a digital age. However, survey findings suggest that farming businesses are less equipped for change than urban or city-based enterprises.
Research carried out in the weeks leading up to the introduction of MTDV reported that 20% of farmers in the UK did not know what MTD was and that 44% had not even considered what the change would mean for their business.
Derek Petrie, director of audit and accounts at Hall Morrice who recently commented on the challenges facing the agricultural, said: “We work with farming businesses of varying sizes, and the concerns they have raised with us about moving to MTDV are real and present.
“We’ve helped our clients in all sectors make the move to MTDV, but many of our agriculture clients are finding that the prerequisite of having online access is a major concern. Internet accessibility – almost invariably a given for urban businesses – can pose challenges when making the move from a manual system to a digital platform.
“It is a reality that some premises have limited broadband access, if any at all, in some of the most rural and remote parts of North-east Scotland. In light of this challenge, HMRC has indicated a potential exemption on the grounds of digital exclusion. Another tenable solution put forward is opting for a desktop-based software.
“However, offline software still doesn’t preclude another major challenge: digital illiteracy. As farmers traditionally tend to have a higher age demographic, research suggests that this increases the probability of cases of less technologically literate business owners.”
The compulsory change that MTDV brings with it will understandably be a concern for many agricultural businesses – but Derek believes they should not feel disheartened by the change. Rather, Derek encourages farmers and agricultural entrepreneurs to embrace the perceived upheaval and start looking at it from a new light.
Derek said: “Farmers can take this as an opportunity to streamline their business as there will be real benefits of migrating to a digital platform. Reporting accounts will become more efficient and accurate, allowing farmers to view their accounts in real-time for better analysis of profit estimations and cash flow. All this helps to make more informed business decisions.
“Despite its advantages, it is understandable that some farmers might still prefer the paper-based system. The new VAT system will be fully digital and many farmers will find it difficult to adjust to such a big change.
“With a long track record of working with those in the agricultural sector, our firm is fully prepared to guide our clients through their transition. For farmers requiring assistance with online software programme packages, our dedicated team aims to offer tailored advice as to which software would be more suitable.
“We encourage our existing and potential farming clients to get in touch to discuss any queries relating to the move. We’ll also be able to assist with a demonstration of the programme and what we will need, going forward, to file reports to ensure clients’ accounts are fully compliant with HMRC’s requirements.”
Hall Morrice can be contacted on 01224 647394