Small firms should brace for £330 million IT tax burden
The majority of small businesses will need to update their computer hardware to complete new digital tax processes, the Government has warned.
Despite the prospect of savings in the long-term, firms will still need to face a substantial initial outlay in order to ensure their systems are updated.
It is estimated that this will total in the region of £330 million, with around half of small businesses – more than three million – needing to upgrade their hardware.
One in ten will also need new equipment to ensure they can log quarterly tax updates and maintain digital records.
HMRC says the move will enable businesses to manage their affairs in a more effective manner and claims the move will reduce the £8 billion figure for tax lost annually as a result of taxpayer errors.
It also suggested that it will save businesses in the region of £80 million a year in admin costs – but the Federation of Small Businesses disputes this, saving it could triple the administrative burden placed on small firms.
The Treasury Select Committee has called for a pilot to establish the true administrative costs for small businesses of making tax digital.
According to HMRC, the biggest cost will come in terms of time, as it is thought firms will need six hours on average to familiarise themselves with the new regulatory framework.
HMRC time to pay services can provide much-needed help for any businesses that are struggling to meet their tax obligations for whatever reason.
Advisory services can assist if a business feels they are facing unfair penalties, the threat of bailiffs, winding up petitions and other financial issues.
The Budget also detailed that the new rulings will not come into force until April 2019 for businesses with an annual turnover below the £83,000 VAT registration threshold, while those with a turnover of less than £10,000 will be exempt.
HMRC is cracking down on unpaid tax and applied to shut down more businesses in 2016 than in previous years.
By Phil Smith
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