Fewer than four in 10 farm businesses across Scotland are producing the bookkeeping data required for Making Tax Digital, HMRC’s new digital tax filing system.

Making Tax Digital has been described as the biggest shake-up to the taxation system since Self-Assessment was introduced more than 20 years ago. It requires all businesses to submit summarised accounts to HMRC on a quarterly basis and becomes effective for VAT registered businesses from April 2019. Non-VAT registered businesses will be phased in next and the roll out completed by 2020.

While Johnston Carmichael’s survey found that four fifths of Scotland’s landowners and tenant farmers were aware of the impending tax changes, only 39% said their current form of bookkeeping was compliant. More than a third – 36% - didn’t know if their accounts were being recorded in the correct format.

Robin Dandie, Partner and Head of Agriculture at Johnston Carmichael, said:

“With many businesses and individuals already banking, paying bills and interacting online, the Government’s plans to digitalise the tax system through Making Tax Digital (MTD) is a logical step. MTD will help to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.

“While the April 2019 deadline is only for businesses with a turnover above the VAT threshold of £85,000 it is concerning that over 60% of farming businesses have not moved to digital record keeping. I’d urge any farming business that will be affected by the introduction of MTD next year to seek urgent advice.

“Broadband is increasingly accessible in rural locations. Even businesses that are not required to be compliant by next April should be looking at this and embracing the digital future, which will save businesses time and money as well as give a real-time picture of their finances.”

The new system requires businesses to keep records in a digital format and file their VAT returns using compatible software. The UK Government recently published draft legislation that proposes the introduction of a points-based penalty system for failing to make returns and late payments.

A total of 234 respondents took part in Johnston Carmichael’s survey with 60% describing themselves as landowners and 17% being tenant farmers. The remaining 23% were mixed landowners and tenants.

Johnston Carmichael offers a free tax and business advice line to all NFUS members. Members should call 0800 023 2368 or email nfus@jcca.co.uk to speak to a local expert.

Visit our dedicated Making Tax Digital page for more information about how to prepare.