Small business owners are not prepared for the introduction of Making Tax Digital (MTD). From April 2018, business owners will have to file digital quarterly tax reports, as well as record their expenses using accounting software that can send updates to HMRC. However, research is revealing that 65% of small business owners do not use accounting software to manage their finances and 22% of respondents rely on manual record keeping. The Federation of Small Businesses has also estimated that complying with MTD will cost small business owners an average of £2,770 per year.
Andrew Tyrie, chairman of the Treasury Committee of MPs, has written to Jane Ellison, Financial Secretary to the Treasury, and Mike Cherry, chairman of the Federation of Small Businesses, about the compliance cost of Making Tax Digital.
The FSB has estimated digital record keeping and reporting will cost around £2,770 per year per business on average, while the Government impact assessment puts the transitional cost at £280 per business. Tyrie said: ‘At least one of them must be wrong. If the FSB are right, the effects of MTD would be crippling for small businesses. If the Government are right, businesses have something to gain in the longer term and one would expect them to be queuing up to join the pilot.’
The Treasury says it loses out on £8 billion a year due to ‘avoidable errors’ by small firms.
(Now if only we could get HMRC to answer the phone)