Making tax digital - consultations

farmer using laptop_7665

In brief...

HMRC has issued a number of consultations on 'Making Tax Digital' which will make it mandatory for the self-employed to keep records digitally and to report more frequently from 2018.

The NFU is urging members to get involved and let us know your views or concerns. We are looking for evidence in order to respond to these consultations and mitigate any adverse implications for farmers.


In 2015 the government announced plans to make tax digital by 2020. 'Making Tax Digital', or MTD as it has been labelled, involves introducing digital tax accounts which will be pre-populated with figures for employment income, bank interest, and other information such as state pensions which HMRC already receives from third parties.

This may make life easier for some taxpayers and the government has suggested it will remove the need for self assessment tax returns. However for the self-employed, or those with property income, MTD could prove more challenging than submitting an annual self assessment tax return. This is because they will be required to keep their accounting records digitally using accounting software and update their digital tax accounts at least quarterly. HMRC suggests this will increase the accuracy of what is reported and help close the tax gap.

What's happening now?

HMRC has issued six formal consultation documents on different aspects of Making Tax Digital. There is also a shorter overview document.

HMRC have said that they recognise that these reforms are ambitious and radical and there is a lot to design and develop before 2020. They have also said they recognise it is important that they consult widely with interested parties to help shape these changes. The six consultations set out detailed plans on how they propose to make tax digital and to simplify the tax system, covering:

  • how digital record keeping and regular updates will operate;
  • options to simplify tax for unincorporated businesses, including how the self-employed map accounting periods onto the tax year, extending cash basis accounting and reducing reporting requirements for unincorporated businesses;
  • extending cash basis accounting to unincorporated property businesses, making life simpler for landlords;
  • how the voluntary pay as you go arrangements announced at this year’s Budget will work;
  • changes to tax administration to effectively underpin compliance with MTD and ensure we have a fair and proportionate penalties regime; and
  • how HMRC will make better use of the information we currently receive from third parties to provide a more transparent service for customers.

What has the NFU been doing?

During the last year the NFU has regularly attended HMRC digital stakeholder groups to discuss the proposed new obligations and our concerns over rural broadband infrastructure, additional costs and increased administrative burden when many of the suggested benefits such as predicting your tax liability do not seem realistic for a farming business. We have also organised farm visits for HMRC senior officials to discuss their proposals.

Our initial thoughts

We anticipate that the consultation document entitled Making Tax Digital: Bringing business tax into the digital age, which outlines the proposed new obligations for digital record keeping, quarterly updates, and 'end of year' activity, will be of most interest to members.

We believe issues for our members are likely to include their ability to meet the proposed new reporting obligations given the limitations of their digital infrastructure, the additional cost of doing so, and the apparent lack of tangible benefits to their business, and the time scale for implementation.

How members can help

The NFU is urging members to contact us with views and concerns and to provide us with the evidence we need to respond to these consultations and mitigate any adverse implications. If you would prefer to speak with us, or may be interested in attending a consultation meeting or participating in a small working group please contact NFU Head of Tax, Michael Parker on 02476 858722.

  • Posted by: W W WynnePosted on: 02/09/2016 09:37:47

    Comment: Livestock farmer - with limited labour and daytime hours would HMRC be prepared to offer a 24 hour telephone service so that we can ask for their advice when we have finished work? With an internet speed here of 1.2 Mb receiving WAG's emails is already a hit and miss affair. Oh, and could they please let us have a 12-month weather prediction and livestock prices because those two play havoc with our Cashflow.
    By the way - this is my Third attempt to submit this form - the robot (not me) timed out the first one bcos the line speed was too slow.
  • Posted by: WD SykesPosted on: 29/09/2016 14:54:42

    Comment: Quarterly reporting would be onerous and time consuming with no benefit to the taxpayer.
  • Posted by: Derek BondPosted on: 30/09/2016 09:42:53

    Comment: Do we take as examples:
    Digital land mapping, which has chopped our farms into hundreds of pieces and rendered BPS claims a nightmare.
    Sheep EID which has turned our flocks into strings of unintelligible numbers which must be reconciled upon every movement, adding huge time and costs to all, and giving RPA opportunity to earn money from fines,
    Vat registration which requires two days each quarter to reconcile bank accounts and every scrap of expense paper to be kept for years.
    We all know farming is not done in an office, cash flow does not equate to profits, and most small farmers earn way below the minimum wage, yet it is constantly targeted by regulators with schemes which enable them to build empires upon our shoulders.
    As a first start NFU should defend annual reporting and the simplified accounts procedures, since almost all our income comes in three months of the year, and quarterly profit or cash flow statements would be meaningless.
  • Posted by: MaryPosted on: 07/10/2016 17:57:51

    Comment: There are many reasons why this is infeasible for most farmers, not to mention the past performance of government IT projects. Although I am capable of completing my monthly VAT returns, weekly RTI submissions and even the Basic Farm Payment application, this sounds like we would have to basically produce a profit and loss account every quarter which, in our case would definitely have to involve our accountant, adding both time and costs.
    We have to prepare an annual valuation in order to produce our annual accounts, so would we then have to do our valuation every quarter?
    Our accountant takes about 10 weeks to produce our final accounts so in what time scale are HMRC expecting us to produce these figures by?
    What benefit will this produce? Are they going to demand we pay the tax every quarter? Farming cash flow varies so much during the year, so this would be totally impracticable. We already pay an amount of tax on account for the following year, based on the previous years profits so HMRC are getting a payment upfront already so are not losing out under the present system.
    We want less bureaucracy, not more.
  • Posted by: daniel scottPosted on: 21/10/2016 16:02:58

    Comment: 1 Download speed of 0.47 mbps
    2 Since we already have to estimate our income and pay on account, quarterly accounts will add work but not accuracy.
  • Posted by: Gillian BarberPosted on: 16/03/2017 20:38:15

    Comment: As elderly farmers this will prove the final nail in the coffin, bad enough the annual accounts, four times a year will be deeply stressful. Already accountants fees take up an enormous part of a very small subsistence profit.
    Our computer skills, and even our old computer are simply not up to it. We care for our animals, the environment and ourselves, it is of no advantage to us whatever to add these burdens at our age. All our income will come within a three month period, will we be able to set losses from the rest of the year against it?
    A terrifying prospect, all our tax is paid every year and we keep careful records, Our life should be simplified and supported not totally messed up like this to no practical advantage I can see?