Farming businesses too complex for quarterly reporting

The rigid framework of quarterly reporting under Making Tax Digital does not make sense for the farming community due to accounting complexity, use of capital allowances and seasonality of the business, NFU head of tax tells Lords committee. Sara White reports

The head of tax from the National Farmers Union, representing over 55,000 UK farmers, was up before the House of Lords special committee investigating the viability of HMRC’s plan for Making Tax Digital today.

‘We are pressing that complexity within small farming businesses needs to be recognised,’ said Michael Park, head of tax, National Farmers Union (NFU). ‘The £10m plus partnerships have a deferred starting date; I think farming businesses can be just as complicated as those.’

The Lords were concerned about access to Broadband in rural communities but this was batted off by the NFU as less of a problem than the absolute complexity of accounting and tax compliance for farming businesses.

Park said: ‘There are much bigger issues [than Broadband] for the farming community with Making Tax Digital. Other than the access to digital, they work over an annual cycle or longer, so it is the fifth one [reconciliation] where you would see all the adjustments. Most of them are VAT-registered anyway.

‘The quarterly ones would not show anything, just cashflow. They are capital intensive businesses so they have large amounts of recognitions for equipment leasing, for example, capital allowances, agricultural tax reliefs. All of those things are precluding them from using cash reporting.

‘It is a mixture of factors that makes this more difficult for them, diversity of businesses, such as letting cottages on land and selling electricity to the grid. For income tax purposes they have to separate income and expenditure and it seems to be if they cannot align year ends they could have multiple quarterly updates. They could have 15 updates quite easily which does not seem more efficient,’ he added.

The Lords also questioned Parks on the proposed HMRC timetable and he stressed that the current rollout plans were virtually unworkable.

‘We are just as concerned about the impact on VAT registered businesses and the complexity in terms of how that would work.

'HMRC has listened but it is the timetable; we could work on an alternative solution for VAT-registered businesses or aligning reporting if there was time, but there isn’t time. It is going to be extremely difficult within the timescales to adjust; we have suggested a deferral until high speed broadband is rolled out.’ 

The House of Lords economic affairs committee will be questioning top HMRC officials on Making Tax Digital on Wednesday 22 February. 

Be the first to vote

Rate this article

Related Articles