AGRICULTURE businesses will be required to fundamentally change how they submit information to HMRC under the imminent "digital transformation" of the UK tax system.

According to accountants Johnston Carmichael, the Revenue’s ‘Making Tax Digital’ project could introduce quarterly reporting for unincorporated businesses – sole traders and partnerships of individuals – and landlords, as early as April 2018.

The quarterly processes will require financial details to be submitted online, which will oblige farmers and other rural business people to adapt their administration and reporting processes, explained Neil Steven, partner in firm’s agriculture team.

“The ambition and scale of this project is admirable, and the rationale for making things slicker and more in tune with the digital era is clear, but establishing new systems and processes in an already-tough business environment will be an unwelcome distraction for lots of our clients.

“As ever, the advice here is to get ready as early as possible. Should HMRC push ahead with these proposed changes it’s important to start examining your processes and speaking to your advisers about how best to make the necessary changes.”

The digital regime will also introduce new ‘penalty points’ for businesses which are late with tax reporting. Late submissions will attract points, and a fine will be levied once a certain level has been reached.

The changes were announced by former Chancellor George Osborne in May 2015, where he spoke of ‘the death of the annual tax return’. While this may have been welcomed by many at the time, Mr Steven said that the additional administration and record-keeping required for quarterly reporting could create an extra burden on businesses.

“Many farmers are especially busy during the spring and harvest season, and the annual tax return and related compliance work could be handled at another time. However, quarterly reporting could make this much more challenging.

“Data security is an issue too and we’re moving away from email ourselves to allow clients to submit financial information via secure online portals, to improve efficiency and security.

“Ultimately these changes are coming, and it might be worth drawing parallels with the introduction of Self Assessment in the 90s. That felt like a major headache at the time, and there’s no doubt it was challenging at the beginning. However, once changes are introduced and systems and processes have been adapted, they very quickly become normal – but getting there can be a tough slog.”