Rural businesses – are you fully aware of how MTD for VAT will impact you?
Everyone is suddenly talking about Making Tax Digital for VAT (“MTD”), but many rural businesses may not be fully aware of what it means or how it will impact them, let alone what they might have to do to ensure…
Blog12th Oct 2018
Everyone is suddenly talking about Making Tax Digital for VAT (“MTD”), but many rural businesses may not be fully aware of what it means or how it will impact them, let alone what they might have to do to ensure they comply. From 1 April 2019, if you are VAT registered with a turnover greater than £85,000, you will no longer be able to log onto HMRC’s Government Gateway to submit your VAT Return and must be able to file your VAT return by using (what HMRC refer to as) only ‘functionally compatible software’ (digital records). This means that the underlying records need to be digitally linked, without the need for manual intervention. Businesses are now becoming aware of the extent to what functionally compatible software really means and the changes they will need to make to their financial record keeping just to be able to carry on doing something they had no problems with for years.
For some businesses who still maintain manual records, this will require a significant change in their business processes to make sure they are ready for MTD. Even for businesses that already use accounting software there is no room for complacency as older versions of some software will not be updated to make them MTD compatible, so asking your software provider now whether they will be MTD compatible is critical. HMRC are currently working with software providers and the list of compatible providers is now available on HMRC’s website, with this list being added to regularly.
However, does the introduction of MTD have to be all bad news? On one hand, it is potential problem which businesses know has to be resolved, but in looking for a solution, rural businesses have a real opportunity to review their accounting system and processes. To look to see where the business could make time efficiencies in maintaining records and consider making some long overdue changes that could result in improved budgeting and business management. From the already MTD compatible software providers list, you will have various options but it is a great opportunity for businesses to embrace the move to digital record keeping and consider moving their accounting records onto one of the cloud based platforms. The shift towards farming businesses now maintaining their financials on a cloud-based accounting platform has been evident, with many accountants demonstrating the significant benefits achieved by the efficiencies of farming businesses automating their basic bookkeeping processes. The ability to produce regular detailed reports that deliver key financial indicators of the business has resulted in them having meaningful real-time financials that help them assess their performance and significantly aid tax planning opportunities. With technology in both the farming sector and cloud accounting sectors advancing at faster pace now than ever before, what further benefits does cloud accounting hold.
As well as the comfort of the business being fully MTD compliant, some of the cloud accounting platforms have the advantage of a large number of app add ons that fully integrate with their software to offer different types of functionality.
So what kind of app add-ons might a farming business using cloud accounting software choose, making their business even more efficient and aiding the business to grow? Sector stock application add-ons that link direct with the cloud accounting software to automate that process. For the processing of supplier invoices and receipts, an app that automatically converts that data on the invoice, uploading to the cloud accounting software, whilst storing the original invoice digitally. These apps can save more time, removing the risk of errors in a manual process. Cashflow is of course key, so implement a cashflow forecasting app that uses the financial information to keep an eye on future peaks and troughs
Do not look on MTD for VAT purely as a problem and take the opportunity to assess what your business needs. We have already helped a number of our rural clients transition to the cloud and by having trusted advisors that also have dedicated in-house cloud accounting and rural specialists who have developed strong relationships with the cloud accounting and app developers is key to keeping one step ahead of HMRC’s MTD Initiative. You might end up thanking HMRC for forcing this change.