Head for the Cloud and be fit for the future
HMRC want to be one of the most digitally advanced tax administrations in the world, to improve efficiency, effectiveness and ease of compliance, which can provide an opportunity to local farming businesses.
Following the announcement of HMRC’s latest initiative, ‘Making Tax Digital', from April 2019, many VAT registered businesses, where the turnover exceeds the VAT threshold, currently £85,000, will need to file their returns through an approved accounting software, bridging software or via an application programming interface-enabled spreadsheet.
Although VAT registered businesses are first to experience change, we're still waiting for more information from HMRC on their next steps. We suspect that there will be change ahead for businesses of all sizes.
Making Tax Digital calls for businesses to consider whether the way they maintain and submit their accounts will be compliant in the future.
An approved accounting software confirmed to be compliant with MTD would be a Cloud accounting package from QuickBooks or Xero. Alongside simplifying traditional accounting, these products include features that automate processing and improve efficiency.
It is an uncertain time in the UK farming industry with the impact of Brexit yet to be fully understood. We are advising our clients to be proactive and to look at their businesses to ensure that they are in a strong position and are fit for the future.
Cloud accounting enables business advisors, like accountants or consultants, to have remote access to your data and assist with your plans for the future, rather than reviewing the past.
The Cloud works with numerous third-party apps, including budgeting tools, cash flow forecasting and stock management, property management and so on. Combining apps with the software gives businesses a greater overall view, including identifying areas where performance can be improved.
The Cloud will allow you the visibility to consider project appraisal for new ventures, offering insight into the impact on profitability and cash flow that an increase/decrease in income, such as milk price fluctuations, grain price rises or a change in interest rates, may have.
Often farm businesses, although profitable, have increased pressure on their cash flow. Instant insights into budgeting and cash flow forecasts, together with regular reviews and updates with your advisors, allow you to make informed decisions in a timely manner.
At Whittingham Riddell we are taking time to review how our clients manage their financial data, ensuring that future changes from HMRC are prepared for and offer an opportunity to get the most from accounting data.
Andrew Rawlings is senior manager of the Whittingham Riddell farm team
