Time running out for farmers to comply with Making Tax Digital

There is less than two months to go before all VAT-registered businesses must comply with Making Tax Digital (MTD) – and there are only limited exemptions for opting out.

From 1 April 2022, VAT returns must be filed through functionally compatible software that links to HMRC’s API platform.

Previously, only businesses whose taxable turnover exceeded the £85,000 VAT registration threshold needed to comply with the requirements of MTD, but from April, this will become mandatory for all VAT-registered businesses.

See also: Digital tax records: Next step for VAT-registered businesses

These include those whose taxable turnover is below the registration threshold, but which are voluntarily registered.

Martyn Dobinson, a partner at Saffery Champness and a member of the firm’s Land and Rural Practice Group, suggests that for some businesses with minimal VAT recovery, deregistration could be preferable to the additional compliance.

Taxpayers can apply for an exemption from MTD for VAT, but only in very limited circumstances, such as unreliable internet access and age or disability making it impractical for the taxpayer to use a computer, tablet or smartphone.

Mr Dobinson says HMRC will consider applications for exemption on a case-by-case basis.

“Where the only reasons are additional effort, time or cost to transition or comply, an exemption is unlikely to be given,’’ he points out.

“Those reasons may, however, be taken into overall consideration with other factors.”

Penalties delayed

HMRC has delayed the implementation of its new penalty regime for the late filing of VAT returns and payment of VAT until 1 January 2023.

This new regime was due to come into force from 1 April 2022, but HMRC has delayed the implementation due to additional time needed to ensure its IT systems are ready.

The current default surcharge mechanism will continue to apply until the deferred new regime is introduced, says Mr Dobinson.

He advises taxpayers who are having difficulty paying VAT liabilities on time to discuss their circumstances with HMRC.

It may be able to agree a “time to pay” arrangement to help manage the risk of late payment penalties, he adds.

Are you, like many other farms, missing out on tax claims for R&D?

If you’re a limited company, you could be eligible for tax credits if you’re carrying out R&D on your farm. For more information and to find out if you’re eligible visit our R&D tax credits page.

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