HM Revenue & Customs began their MTD (Making Tax Digital) project in April 2019, requiring all VAT registered businesses with turnover above £85,000 to make their VAT returns by electronic reporting. As the £85,000 turnover threshold has remained constant, more businesses year on year are required to comply.

The MTD project was intended to encourage electronic reporting and the transition to bookkeeping software. For those already familiar with various software packages, this was an easy move. For those using a manual cashbook the change of bookkeeping system and adoption of electronic reporting was a bigger step. There are many general bookkeeping packages available which have been promoted heavily in the media, as well as agriculture-specific software, which all meet HM Revenue & Customs’ requirements. We have helped numerous clients with set-up and training, and recommended bookkeepers for others, to help reduce the stress of learning a new system.

We now move towards the next phase of MTD where all VAT registered businesses will need to adopt MTD reporting from 1 April 2022.

Our agricultural clients face a choice:

  1. De-register from VAT and the problem is dealt with…for now. Deregistering from VAT would be expensive for the many businesses who regularly reclaim Input VAT. However, the next phase of the Government’s push towards electronic reporting is to implement Income Tax self-assessment reporting. This means everyone, VAT registered or not, will eventually have to keep electronic records. For a business with assets purchased over the years and Input VAT reclaimed, VAT will need to be repaid to HMRC based on the market value of those assets, potentially creating a large VAT bill. As mentioned above, the turnover threshold has not changed in the last few years and is not likely to; the business could eventually reach the £85,000 threshold and be required to VAT register again.
  2. Accept the changes and start using electronic bookkeeping software. Ellacotts are discussing MTD with clients. We know our clients’ businesses and can advise on suitable bookkeeping packages. Many clients who changed systems back in 2019 had the same worries: “Will I be able to learn the software as I’m not very good on computers?” “Our farm Wi-Fi is useless, how can I report data when I can’t even get onto the internet?” and “How much is going to cost me?” Ellacotts can help!


HMRC do have some exemptions to MTD for now:

  • Age or disability
  • Religious grounds
  • Location – if you live in a remote area with poor internet and no chance at all of getting signal, and have exhausted all possible solutions.

These exemptions are all very rare and HMRC have been reluctant to grant them. HMRC will consider each application on a case by case basis.

Ellacotts are here to explore solutions with you, which could be:

  1. Training – by us, or through the software provider;
  2. The Ellacotts team bookkeeping for you;
  3. Recommending a farm secretary or bookkeeper with compliant software.

If you need to make changes in order to comply with MTD, Contact us sooner rather than later to discuss the best options.

Information for readers: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.