Finance

Trim the Fat with Accounts Solutions that Make Sense

With economic outlooks for 2022 predicting increasingly inflated input costs, analysing your business incomings and outgoings (and ensuring the balance stays as healthy as possible) becomes even more critical.

Fortunately, with the right tools, a wealth of data can be generated from just ‘doing the books’ (entering invoice and payment details), giving you a detailed picture of what works for your farm… and what doesn’t. This includes which customers and suppliers produce the best margins for you, what areas of your business perform the best and why, highlighting any excess slack to trim and maintaining control over your debtors.

Investing in economically sensible tools such as SUMIT’s agri-specific Total Accounts software can provide high returns on investment by helping you track this painlessly. Additionally, you can be confident that providers from within the industry really understand the ins and outs of your business, potentially more so than large-scale generic programs.

With the extension of HMRC’s Making Tax Digital scheme to all VAT registered businesses (previously only those with annual turnover greater than £85k) from April 2022, software is now a necessity if you are to remain legislatively compliant.

Choosing a product that specifically suits your business can be daunting, especially when there are a number to choose from, but focussing on agrispecific packages, such as SUMIT’s, will help to narrow your search and make sure you’re dealing with software houses that really understand your needs.

Explore options that make good financial and business sense to minimise risk for you over the coming years.

Lump sum exit payments need careful consideration, says Carter Jonas

Tenant farmers need to fully understand the details and tax implications of the Government’s lump sum exit payment scheme before making any decisions about their retirement, says Carter Jonas.

Details published this week should be welcomed but may not go far enough, according to James Bradley, a Partner at the firm.

Mr Bradley said many farmers have been waiting to see the details of the scheme, so the development should be viewed as “a positive and helpful step”.

He said: “The issues that businesses face with succession planning and/or retirement, coupled with barriers to entry experienced by younger farmers, are well known, so it’s worth looking at any initiative that can smooth a path out of, or in to, the industry.

“Careful consideration should be given to the offer being made by Government and how this might benefit an individual retiree’s plans. For example, full residential value is rarely reflected in the rent paid for Agricultural Holdings Act tenancies, and the outgoing farmer will find residential rents to be both higher and reviewed more often.

“Operation of farm businesses can also offer other allowances and benefits that should not be forgotten when making an evaluation. A lack of retirement provision and availability of housing is a major problem for many tenant farmers.

“The lump sum exit scheme is not a grant and will therefore be subject to Capital Gains Tax. With no base cost of entitlements the whole amount will be subject to tax. Individuals should consult with their financial adviser and check personal allowances that may be used to offset gains.

“The principle behind the scheme should be supported, and for those who are already planning or considering retirement, the offer from the Government could be an added incentive to act. However, it would seem unlikely that the details we have seen this week will be the catalyst for a large number of retirements, which is the significant shift that Ministers are hoping to create.”

Make sure your business is ready for mtd by 1st April

From 1st April 2022, the Making Tax Digital (MTD) initiative will be extended by HMRC to include VAT-registered businesses below the current £85,000 turnover threshold who were previously exempt from this scheme. Farmplan, the UK’s leading agricultural software specialists, is encouraging all farms to check that they have MTD compatible systems in place to ensure that they are adhering to these rules.

The MTD regulations require businesses to keep digital records of all transactions that make up the figures reported in their VAT return. If more than one system is used, these need to be linked digitally and kept using an approved computerised method. The regulations will apply to all businesses that conduct VAT submissions, whatever their turnover – those that do not comply will be at risk of facing penalties.

“Many businesses making the switch to MTD are worried about the learning curve,” says Anne Cianchi, Product Manager at Farmplan. “There’s no need to worry in that regard. This is a tried-and-tested process that many of our customers have already made. In fact, we’ve found that once reluctant adopters make the change, not only are they surprised by how easy the transition is, but also by how many hidden benefits are suddenly available to them. From improved efficiencies to easier business performance analysis, the switch to MTD software often transforms the financial management of the farm”

Increasing building material costs impacts insurance

Soaring building material and labour costs are potentially leaving huge insurance shortfalls to cover for rebuild costs in the event of damage to farm buildings or properties, farmers are being warned.

A combination of the cost of materials, such as soft wood, steel, roofing sheets and concrete, along with the difficulties in sourcing them, presents a major problem, raising the prospect of being under-insured by a minimum of 30% for rebuild costs, according to Acres Insurance Brokers.

“We have seen two examples in the last six months where clients have suffered major fire damage, firstly to a cottage and secondly a farm building,” explains Acres director and insurance broker Nigel Wellings.

“In both instances, when quotes were obtained to reinstate the buildings, the insured values were found to be 30-40% below the rebuild costs we are now being quoted. This has left the clients substantially out of pocket,” he says.

In both cases, loss adjustors confirmed the sums insured would have been sufficient to reinstate 12-18 months ago.

“Acres has made the point of speaking to a number of loss adjustors and building contractors dealing with insurance claims, and the same figures of 30-40% increases in re-building costs are being quoted to us,” says Mr Wellings.

“We are strongly urging all of our clients to review rebuild costs on

Although the deadline might feel imposing for some, Farmplan wants to emphasise that making the digital change is not as challenging as it may seem. With over three years of experience to draw on, being one of the very first software companies to be recognised by HMRC back in August 2018, they have seen a lot of businesses successfully make the move. To illustrate just how smooth the switch can be, Anne points to one of Farmplan’s customer case studies. H Snelson & Son Ltd became early adopters of Farmplan Business Cloud in order to comply with MTD regulations and easily transition to digital VAT.

“We wanted to get ahead of the game and ensure we were ready before the HMRC deadline,” says Andrew Nicholls of H Snelson & Son Ltd. “We have found it to be user-friendly, and we’re now working more proactively to simplify our farm accounts. For example, we can now easily put our invoices through the system rather than uploading them in bulk every quarter. This approach really takes the pressure off the team.

For those already using compatible accounts software, the process is even easier. First the software must be linked to HMRC by following the simple instructions given. Then when your VAT return is ready, it just takes one click of the button to submit your figures to HMRC.

“For some farms, this MTD requirement might feel like it’s a big leap,” adds Anne. “However, it’s not as stressful or complicated as it can seem. By making use of the resources and the support available, the transition to MTD software will not only ensure compliance with the new rules, but will also bring so many other benefits at every level of your business.”

both houses and farm buildings, and in many cases, we are increasing the sums insured on these properties by 30-35%,” he adds.

This does not however mean a 30-35% increase in insurance premiums.

“Building insurances are only a proportion of overall farm insurance premiums, and in our experience, although costs of increasing cover vary depending on value, we are often seeing premium costs increasing in the region of 5%,” says Mr Wellings.

“It is of paramount importance in this current building materials market that farmers have reviewed rebuild sums insured,” he concludes.

As independent brokers, the Acres team helps ensure farmers don’t miss potential gaps in their farm policies, through experienced brokers and handlers with a hands-on knowledge of farming.

Rural Finance Benefits from Immediate Finance

Approvals Collaboration between Rural Finance, Sopra Banking Software and BNP Paribas Leasing Solutions UK delivers gamechanging efficiencies to proposal process.

Providing ‘finance autoacceptances while you work’ was the simple, specific efficiency gain that has been delivered successfully by Sopra Banking Software, leading partner of over 1,500 financial institutions across the world, for our well-established broker partner, Rural Finance, in conjunction with BNP Paribas Leasing Solutions UK. The solution developed is an API interface between Sopra Financing Platform’s Sprint broker platform used by Rural Finance and the existing BNP Paribas Leasing Solutions’ technology, also designed by Sopra Banking Software. Marrying the two required a number of technical and organisation firsts; the result was precisely as specified. Today, not only can Rural Finance provide auto-approvals; they, their customers and BNP Paribas have benefitted from the removal of significant levels of re-work that was part of the previous proposal process. The result is greater efficiency between lender, broker and end-customer and as Rural Finance Director, Rex Tattersall reflects, more time to provide customers with a tailored, personal service.

Tattersall comments “As the largest specialist agricultural finance brokering network across the UK, our success relies upon personal service. We aim to be easy to work with, combining empathy with the distinctive requirements of our customers in the rural community, with speed and an understanding of their financial needs. Agriculture is a fast-moving industry, and the capacity to match our financing approach to this and at the same time make accessing finance quicker and easier is a positive outcome for everyone.”

Top customer service rating for independent insurance brokers

A LEADING independent insurance brokers is celebrating after being recognised for its exceptional customer service for the third year in a row.

H&H Insurance Brokers, which operates across the North of England, the Scottish Borders and Wales, has been awarded the Feefo Platinum Trusted Service Award based on independent customer reviews of its service.

Companies are rated by customers online via Feefo and the best are given awards for excellence and delivering exceptional experiences.

Businesses who meet the high standard, based on number of reviews collected and average rating, receive the accreditation.

Paul Graham, Managing Director of H&H Insurance Brokers, said: “We’re thrilled to receive this award from Feefo.

“Receiving the Platinum Trusted Advisor Award for three years in a row is a huge achievement, and something which the whole team is extremely proud of.

“This recognition means a lot because it’s based on feedback from our clients and ultimately keeping them happy is why we come to work each day.

“The award also recognises just how hard our staff have worked in often challenging circumstances over the past year due to the pandemic, and of their commitment to delivering the highest quality of service to our clients.

“It’s vital for us to listen, understand and respond to all our customers.”

H&H Insurance Brokers offer independent advice on all aspects of rural and business insurance. The company has offices in Carlisle; Durham; Newtown St Boswells in the Scottish Borders, and Ruthin in North Wales.

Since 2014, Feefo has recognised businesses which deliver exceptional experiences, using feedback from customers. Its Trusted Service Awards are based purely on feedback from real customers.

Feefo gives Platinum Trusted Service awards to businesses who have achieved Gold standard for three consecutive years. To receive a Gold Trusted Service award, businesses must have collected at least 50 reviews with a Feefo service rating of between 4.5 and 4.9 between January 1, 2020 and December, 31, 2021.

Congratulating H&H Insurance Brokers, Kim Burgess, Head of Customer Success at Feefo, said: “The Trusted Service Awards recognise companies who go above and beyond to provide the very best customer experience.

“I’m so impressed by how our customers have overcome the challenges of the past two years. A particular congratulations to our Platinum Trusted Service winners. It’s an extremely tough challenge.

“I can’t wait to see what our customers achieve in 2022.”

VAT on cottages for Farms, Estates and Holiday Letting

By Ian Craig

Ian Craig, Partner at Azets

The VAT rules on rented houses on Farms and Estates can be complex. If a house is occupied rent free by an employee who is engaged in taxable activities of the business then VAT on repairs and improvements can be recovered in the normal way. If the house is let to the employee or to a third party the rental income is exempt and therefore partial exemption rules should be followed. Partial exemption is complicated but in simple terms if the VAT inclusive spend on cottage repairs and improvements along with any other ‘exempt’ expenditure exceeds £45,000 in one VAT year then all the VAT on the costs will be dis-allowed. This ruling is often mis-understood because spending £45,000 on a rental property is not something that is a regular occurrence. Normally Farms and Estates spend modest amounts on cottage repairs and therefore fall under deminimis rules and get full VAT recovery without having to think about application of the rules. If there are regular projects to renovate and upgrade rental properties then it makes sense to have a rolling programme doing one house per partial exemption year to take advantage of the £45,000 upper limit under partial exemption. It is also worth checking the VAT status of tradespeople used in any project because if they are not VAT registered then that will help to keep the VAT costs below the de-minimis levels. If the house has been empty for over two years or you are converting a non residential property into a residential one then the VAT could be charged at 5% instead of 20% giving an immediate saving.

As the rural tourism market has grown, there has been an increasing trend to develop holiday letting businesses on Farms and Estates. The supply of holiday lets is a service and is a standard rated supply for VAT purposes, unlike the letting of a surplus cottage to a third party. For that reason it is not unusual to separate the holiday letting business from the VAT registered Farm or Estate business for VAT purposes, but any planning needs to take into account the initial capital expenditure incurred to create the holiday lets. This type of VAT planning applies to Farms and Estates with perhaps 2-3 holiday lets, but for those businesses looking to develop the luxury caravanning and camping sector the likelihood is the turnover associated with that will exceed the VAT registration threshold and the VAT rules will apply. There is specific VAT legislation dealing with caravan pitch fees and any rural business involved in this sector would be well advised to ensure they are applying the rules correctly.

We recommend you seek advice from a VAT specialist when carrying out work to any property. Our VAT team at Azets would be happy to discuss your project with you and advise on how to minimise your costs.

If you would like to discuss any aspect of this contact Partner, Ian Craig on 01738 441 888 or email ian.craig@azets.co.uk. Ian is a Partner at Azets, accounting, tax, audit, advisory and business services group.