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The additional costs that Making Tax Digital (MTD) will put onto farm business is becoming increasingly clear, as more NI farmers prepare to keep digital VAT records from 1 April 2019.
Although there has been speculation that the plans could be postponed due to other pressing issues, such as Brexit, the official line from HMRC is that the MTD process for VAT is going ahead as planned.
“VAT-registered businesses [with annual turnover above £85,000] will have to keep digital VAT records from April. That is still the case,” a HMRC spokesperson told the Irish Farmers Journal on Wednesday. There is a cost involved in almost all options for MTD, with subscriptions to accountancy software packages starting from £120/year and full bookkeeping services from £420/year for the smallest farms with few transactions.
The only free option is to file digital VAT records on a standard Excel spreadsheet and submit VAT records to HMRC through bridging software which is available from some private companies free of charge.
“You would need to be fairly computer savvy to go down this route and you will need some support initially to set it up,” maintained Lowry Grant from PKF-FPM Accountants.
HMRC is not providing a free accountancy software package to businesses. Instead, a wide range of packages that are compatible with MTD are available from private firms at a cost.
Software
Most companies offer a 30-day free trial and have a range of packages on offer.
Xero is a general business accounts programme and its basic package starts at £10/month, with other packages available at £22/month and £27.50/month.
Quickbooks is another general business package, with its basic MTD programme starting at £9/month for the first six months, and rising to £18/month thereafter.
The firm also has an advanced programme for £14/month for the first six months, which then rises to £27/month.
Programmes tailored specifically for farms are available, such as Kingswood Accounts provided by local firm TGM software.
Its standard package costs £22/month, or alternatively it can be bought for an upfront cost of £350, with an annual subscription of £150 also required.
TGM also has an advanced package, which allows farm enterprise benchmarking and costs £27/month, or £450 upfront and £150 each year.
In the first year of MTD, records can be kept on spreadsheets and the information can then be submitted online to HMRC.
However, from 1 April 2020, all VAT records must connect automatically to HMRC through MTD compatible accountancy packages or bridging software.
Agents
The highest cost option for farmers is to get accountants or bookkeepers to file all business transactions digitally and submit VAT returns on their behalf.
The exact cost depends on how many transactions are to be processed. Agents contacted by the Irish Farmers Journal indicate that this service will start from £35/month, to cover staff costs and the cost of the farmer’s accountancy package subscription.
To keep costs down, accountants are encouraging farmers to do some of the input work themselves by filing transactions on a spreadsheet and then passing it onto their accountant for formatting and submitting.
“There will be a small cost for clients for this, but the bigger cost will be if the client requires all of the transactional input to be done on their behalf,” Lowry Grant said.
Although reports indicate that farmers have become active in recent weeks in getting organised for MTD, there are still concerns that many farmers are unprepared for the change.
Seminars on MTD organised by Rural Support and CAFRE have drawn large crowds across NI and more events have been scheduled. See northern diary for details.
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