By 2020, the tax system will be transformed by Making Tax Digital (MTD). HMRC envisaged this change as bringing business tax into the digital age and have called for quarterly tax updates. However, this is for businesses with a turnover of more than £10K. Thus, saving these businesses a £400m admin cost but what does this mean for small businesses?
Small businesses will suffer in the transition of the move and will be faced with an average bill of £1,250. Because of the combination of software costs and increased accountancy fees. However, on a more positive side, MTD will enable all businesses to have a real-life view of tax and a calculation of the tax that is due. The news of the introduction of MTD will have come as a shock to the 82% of businesses that do not currently use software, according to research carried out by the Institute of Chartered Accountant in England and Wales. This is why many have called for a delay in its introduction, to allow businesses to adjust. As well as allow the HMRC to consider the impact it will have on small businesses.
Tips to help
- Find software that fits your business
- There is software out there to suit your budget
- Take advantage of the cloud, to be able to work anytime and anywhere.
- Ask questions or share your view
- It will make things easier, only the transition may not be.
- The Digital Tax Account will allow you to ensure your details are correct and be able to access the information the HMRC hold about you.
- Taxpayers will be made aware of their annual tax liabilities, which will allow them to be in a better position to manage their financial obligations.
- All the information will be in one place
- Communicating with the HMRC will be easier and can be conducted at any time.
Making Tax Digital has many divided in opinion and we would love to hear your thoughts, tweet us and let us know.
By accelerating the speed of paying company related taxes, cashflow will become a greater issue to SME’s. Using invoice finance could offer a solution to this problem.