Farmers short of vital information as VAT changes loom

Farmers will have to wait until January to find out if they are eligible for exemption from the rapidly approaching changes to submitting VAT returns.

With just 76 working days left until the fully digital submission system is scheduled to come into effect for most businesses (see ‘What are the changes’), HMRC has postponed the publication of the criteria that set out precisely which businesses will be able to opt out.

The exemption criteria had been due in November and is likely to outline in detail what grounds, including age or lack of access to broadband, will allow businesses to opt instead to submit VAT returns by telephone or potentially the current system.

See also: One-fifth of farmers still in dark over VAT changes

The tax agency told Farmers Weekly this week that affected businesses would not be able to apply for exemption until the new year.

What are the changes?

Under the new system, due to be introduced on 1 April 2019, VAT registered businesses which exceed the VAT threshold of an £85,000 turnover will have to keep a fully digital set of accounts, rather than simply submitting the final figures into the HMRC website.

These must be automatically submitted to HMRC, either by specialist accounting software or bridging software which will take the figures from a spreadsheet.

Businesses under the VAT threshold, or which already have an exemption from filing online, will not have to move over to the new system.

HMRC say the changes have been introduced to reduce the accidental errors businesses make while submitting VAT returns which is costing the Treasury millions of pounds in lost revenue.

See also: Claiming exemption from VAT changes: What you need to know

However, HMRC director of making tax digital for business, Theresa Middleton, was keen to reassure farmers the new exemption criteria will allow businesses that already file online to opt out in some circumstances.

She said: “I don’t think people should worry that because they are doing it digitally now, automatically we will assume that they can move easily over into the new service.”

She said the department is also stepping up its communications with businesses, with those affected to have received a letter by early 2019. However, there are no plans for additional call centre staff or a dedicated helpline.

Time running out

Concerns have been raised in recent weeks by farming unions that given how much there is for HMRC and software companies to accomplish before the start date, there is not time for businesses to prepare for the changes.

HMRC has also not yet opened its pilot testing for the new system to businesses set up as a partnership, or that file VAT monthly – which is how many farming businesses operate.

This will be taking place from January and could mean that both HMRC and software companies could yet be forced to make changes to systems scheduled to go live just a matter of weeks later.

A recent House of Lords report also called for the mandatory introduction of the new system to be deferred for at least one year.

NFU head of tax Michael Parker said: “We would prefer to see a delay in order to give people at the smaller scale time to manage this properly and remain compliant.

“If HMRC won’t do that then they do need to address the issues raised in that [House of Lords] report for smaller businesses and how they will support smaller businesses to manage this.”

TFA chief executive, George Dunn, said: “The simple truth is that we are nowhere near ready for the roll-out of Making Tax Digital and it has got to be postponed.

“Our own discussions with accountants working with farm businesses support these conclusions.”

Mrs Middleton said there are no plans “at the moment” to push back the introduction.

Three things farmers who aren’t ready can do now

  • Speak to your accountant. Many of them are working with a particular software provider to get ready for the changes. Having the same software as them may reduce their workload in preparing annual sets of accounts – which could reduce your bill.
  • Compile a shortlist of potential software packages which seem appropriate. Check it is compatible on the HMRC website. Dozens of software providers are working on bringing products to the market to meet the needs of the varying types of businesses affected, with 43 currently approved for use on the HMRC website
  • Stay up to date with further announcements – you can sign up to free emails from HMRC that are tailored to your business