Making Farmers Digital: The challenges for rural businesses

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Mark Chatterton examines the complex challenges Making Tax Digital presents some of the country’s most isolated businesses and outlines what can be done to tackle them.

Making Tax Digital (MTD) is officially here, but despite the change to the UK’s tax system going live on 1 April sign-ups have remained slow, particularly in rural areas where businesses still face challenges that are delaying their switch from pen and paper to digital VAT returns.

Broadband, Brexit and HMRC

Organisations based in rural locations that fall under the MTD regime and are yet to make the move to digital are up against several complex challenges that city-based businesses have not needed to consider. This goes some way to explaining why many accountants may have seen reluctance from agriculture-based clients.

Delayed broadband delivery has had a huge impact on uptake, and has been cited as one of the reasons that businesses are unwilling to move from paper to digital. Businesses in places like Lincolnshire simply don’t benefit from the same level of connectivity because the incumbent broadband suppliers can’t deliver to more remote areas.

The lack of broadband speed has resulted in many farmers and agricultural businesses putting off making changes to their operations in order to become MTD compliant, as there have been assumptions that accounting software is difficult to implement, run and master.

Traditional mindsets to business operations have also seriously hindered MTD progress over the past couple of years, so it’s essential that farmers have been and will continue to get the right advice.

One myth that we have tried to dispel is that to make a digital VAT submission the accounting software must be cloud-based. MTD-compliant software, a PC and an internet connection are all that is required. Neither do invoices need to be scanned - manual entry by the farmer or the farm secretary onto the software is a perfectly good first step.

Another challenge is that HMRC, which should have been at the forefront of MTD, has been almost silent. The tax authority has essentially failed to communicate the steps businesses need to take and how MTD can help them. This has played a role in failing to change the mindset of people who have been cautious about accounting software. As a result, many businesses haven’t understood, researched and prepared for one of the biggest shake-ups in tax we’ve ever seen.

Brexit has also dominated the headlines over the last three years and overshadowed most of the MTD messaging out there. That’s why it has been so important for accountants and accounting software specialists to communicate with clients and keep them informed.

Within their businesses, farmers have been focusing on preparing for Britain’s departure from the European Union: whatever happens, it’s likely to have a huge impact on the agriculture industry. This has given them little time to focus on MTD, especially as Brexit was initially pencilled in to take place just before MTD.

Embracing change and taking specialist advice

As part of our firm’s communication remit, we’ve been working with specialist agriculture software providers to dispel myths and keep farmers informed so they can prepare for MTD, and our efforts have been paying off.

New figures from Landmark Systems, which provides accountancy software for farms and rural businesses, suggest a surge in rural businesses switching to digital platforms in the final months before April 2019.  Landmark’s own figures show a 200% increase in uptake of their software in the first quarter of this year.

Although MTD came into force on 1st April 2019, businesses have until the summer months to finalise their solution, as this is when the first post-MTD VAT returns need to be submitted. There are also potential exemptions and a bit of leeway available for businesses struggling with broadband connectivity.

Part of the narrative that has been greatly overlooked over the past few years is that by embracing some of the new technology and systems that are available, businesses can save a lot of time and money by assessing their processes and making the switch to digital.

There’s still plenty of work to do, but by embracing change and specialist advice even now it’s not too late for farmers to put systems in place to become compliant and ultimately future-proof their businesses while making savings.

About Mark Chatterton

mark chatterton

Mark is a director based at the Newark office of Duncan & Toplis specialising in agriculture. He advises over 150 family farming businesses in the East Midlands and has first-hand experience of the sector, coming from a family farming himself, as well as having a degree in Agriculture.

His experience includes advising on all financial and taxation issues relating to agricultural businesses and assisting them with change including succession planning. He is often involved with agricultural joint ventures and is also able to advise on the financial aspects of renewable energy projects.

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11th Apr 2019 14:29

I practice in Wales and specialise in farming businesses. Issues that I have noted:
1. Complete absence of reliable broadband. Our office is on a modern business park on the edge of the city and is supplied with fibre but we often lose the connection so have a router that also uses the mobile network (that too is weak and doesn't work in summer when there are leaves on trees which interfere with the mobile signal). We struggle, but at least we have internet most of the time. Most of my clients are in broadband/mobile not-spots.
2. Most farm businesses are partnerships and partnerships could not join the pilot until February and that's when many heard about MTD for the first time.
3. Mainstream accounting software can't automate issues that are specific to farming businesses such as herd basis, 5-year averaging.
4. Traditionally farming businesses make up their accounts to 5 April but mainstream software (Sage, QuickBooks etc) can't cope with 5 April year ends.
5. Farmers are very busy people working from first light to dusk and have always got something more pressing to deal with such as animal welfare.
6. MTD started when my farmers were in the thick of lambing working 20 hours a day. The lambs are priority and by the time lambing is over farmers have got to tackle other tasks that have been on hold for a month.
7. The average age of a farmer in the UK is 59. This age group would not have experienced computers in school. Most of their peers would have first experienced computers at their workplace but farmers would ordinarily have been working on their parents farm and because their parents had no computer experience there would be no computer.
8. Because so many farmers have poor/zero internet and/or no computers, the Farmers Union of Wales has a free service to their members who maintain their VAT using paper records and phone the FUW with their VAT return totals: the FUW filing on the farmer's behalf. We offer our clients the same service. This is a practical solution for online VAT returns but it cannot be applied for MTD.
9. Farm profits are generally poor (well below the NMW for the amount of hours worked) and cannot afford to pay for someone to digitise the records for MTD.

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