Saffery is advising its rural clients that just days remain for those farm and estate businesses that are operating Making Tax Digital (MTD) for VAT to have digital links up and running across their record keeping systems.
HM Revenue & Customs (HMRC) requires that where a participating business holds financial records on separate systems, including spreadsheets, that there should be a digital link between these records. Previously, it would have been possible to transfer data from one set of records to another manually but from 1 April 2021 this will no longer be allowed. However, the transfer of information digitally by email, for example, will be permitted, and certain VAT calculations can still take place outside of the ‘digital journey’ (capital goods scheme calculations for example).
Businesses therefore need to have their systems up-to-date in time for their first VAT return period on or after 1 April 2021. An extension can still be requested, but this must be submitted to HMRC before the end of the ‘soft landing period’, which would be 31 March 2021 for those businesses on the March, June, September and December VAT quarter ends.
Also, it should be noted that from 1 April next year all businesses that are VAT registered will need to submit VAT returns through MTD compatible software. Currently, such a requirement only applies to those with a taxable turnover greater than £85,000 (the current VAT registration threshold).
“An extension to the digital links requirement was announced in March last year because of the Coronavirus crisis and further time was allowed for businesses that had moved to Making Tax Digital for VAT to have these links set up and running.
“For many businesses this could be a complex procedure. There will still be some that are holding records using different programmes or software and, despite the extension, will not yet have finalised that streamlining process.
“How might this affect a rural business? For example, where a business has a farm shop then the reconciliation of sales and receipts across businesses will have to be digital. The same may apply for bookings of holiday accommodation or other areas where separate business streams need to be amalgamated in accounting records.
“With HMRC having already extended the lead-in period once, we anticipate that they may not be as flexible now where the necessary process changes have not been made. Penalties may be levied in the case of non-compliance”