Making Tax Digital – an opportunity for your business
May 22, 2019
On 1 April 2019, all businesses with a taxable turnover of over £85,000 were required to comply with Making Tax Digital (MTD) for completing their VAT returns. MTD is an opportunity for your business to obtain better management information. A computer package to record information can give a superb insight into your business – provided its full potential is exploited. Enterprise recording in your business will mean a small amount of additional work but it will pay dividends at the year end.
The VAT proposals
There are two elements to the VAT proposals:
- Businesses will be required to maintain digital records using some form of digital recording software
- VAT returns will need to be submitted directly from the software that the business (or their agent) is using, meaning that it will no longer be possible to simply type the 9 box VAT return figures into the HMRC portal.
The VAT return from any VAT period commencing after 1st April 2019 will be required to comply with Making Tax Digital for VAT.
Using Agricultural packages
Specific agricultural computer packages generally allow for enterprise recording automatically. “Generic recording” packages can also be easily adapted to allow for enterprise recording.
Why record to enterprise level? The advantages are as follows:-
- You can see which enterprise on your farm is producing the best margin and the best return on resources such as land, labour and capital.
- It will allow for easier bench-marking through the CAFRE system. This will then highlight management weaknesses which can be addressed in order to improve profitability.
- It can allow for “what ifs” so that planned investments can be critically appraised before they go ahead.
There a few main principles that should be observed when enterprise recording your business.
- Split “variable” and “overhead” costs and record them against the appropriate cost centre in your chart of accounts.
- Allocate variable costs to the correct enterprise. This is best done as invoices are inputted to the digital recording package.
- Allocate grass costs to a forage enterprise and divide those costs pro rata at the end of the recording period.
- Ensure all costs are included to give as true a picture as possible. There is no point in mis-leading yourself as to the profitability of any enterprise!
After the first year of enterprise recording, you will get a much better picture of your business performance. CAFRE bench-marking can be completed easily at this stage. You should see MTD as an opportunity to improve recording within your business.