The government’s aim to Make Tax Digital is in danger of damaging smaller firms, an accounting software vendor has warned. FreeAgent co-founder Ed Molyneux has said that unless government grants an extension to the deadline, SMEs will struggle to make the transition to the new online service.
“Making Tax Digital is a great opportunity for business owners to have proper clarity over their business finances and be better equipped to calculate and pay their tax bills. But it is also a major piece of legislation that will have a significant impact on the UK’s micro-business sector,” Molyneux said.
He believes that all unincorporated businesses making less than £83,000 – the VAT threshold – should have an additional year to prepare for MTD and used the recent consultation period as an opportunity to suggest that the treasury should increasing the turnover threshold for the cash-basis reporting scheme to £166,000 – double the VAT threshold
‘More flexibility needed’
“The government has ambitious targets in place for implementing its MTD strategy and getting people to start reporting their tax digitally, but I believe there needs to be more flexibility when it comes to smaller businesses. The average freelancer or micro-business owner doesn’t have the resources that a larger SME has to get themselves prepared for the switchover, and many will struggle to upgrade their processes in such a short timeframe.”
“We know that the very smallest businesses making less than £10,000 will be exempted from the scheme entirely, but we are now urging HMRC to help those in the next category up. We believe every business making annual turnover of between £10,000-£83,000 should have an additional year to prepare for MTD.”
“This will mean that HMRC can monitor how larger SMEs are managing the move to digital tax, without having to worry about large numbers of micro-businesses struggling to adapt to the changes or having issues with implementing new technology.”