Small businesses report confusion over digital taxes
Micro business owners and freelancers have reported confusion over Making Tax Digital, but they are not alone, according to a new study.
While 43% micro-business owners are unsure of what it is, even more have reported the need for greater information, according to FreeAgent, an accounting software provider.
Of those that do understand what the new process will entail, 86% said they were yet to be provided with sufficient information on the plans.
When implemented, small businesses will need to keep digital financial records and provide quarterly updates relating to their tax to HMRC.
Firms that are aware of tax digitisation and the process associated with it were mostly positive about its implementation, according to FreeAgent.
A total of 45% of those questioned said it would make the process easier for them, with just one in five suggesting it would become more difficult.
The digitisation of the system represents one of the biggest changes for several generations and it will likely impact businesses from 2018 onwards.
Despite the relatively short timeline before implementation, more assistance and guidance is still needed by businesses, especially smaller scale firms, about how it will impact them.
FreeAgent suggest that companies that are well informed about the new digital plans understand the benefits, although greater clarity is needed to aid those who are struggling to get to grips with it.
The potential for poor quality tax returns or mistakes in the process means it is an issue that will need to be addressed, as smaller firms can ill afford the additional costs that come as a result.
A range of options exist to help businesses who fear financial difficulty, from restructuring some of the main aspects of the firm to considering the future in the form of contingency planning.
HMRC has announced a series of consultation documents in order to make paying tax less burdensome.
Around 1.3 million small businesses and landlords with modest turnovers may also be exempt from the need for digital-record keeping, joining 1.6 million others who are already excluded.
The move follows long discussions relating to its impact on small businesses, while the Government is reportedly set to defer digitalisation for another group of businesses so as to aid the transition.
By Phil Smith