Over a third of the UK’s small-to-medium-sized enterprises (SMEs) are unsure how the UK Government’s Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) plan will affect them, as HM Revenue & Customs (HMRC) continues its push to digitise tax for businesses.
This finding emerged from a poll by a cloud accounting specialist, with some 38.9% of small business owners quizzed stating that they didn’t understand anything about the new legislative changes, which are set to take effect in 2024.
Making Tax Digital, or MTD, is a plan to digitise the UK’s tax system for VAT, Income Tax Self Assessment, and Corporation Tax. The flagship plans will therefore affect both individuals and businesses, changing how they report their earnings to HMRC.
The background of MTD so far – and what UK businesses make of it
MTD for ITSA is the second phase of the broader MTD legislation, which is geared towards making HMRC “one of the most digitally advanced tax administrations in the world.” The Government has said that MTD will help boost the effectiveness and efficiency of tax administration, at the same time as making it easier for taxpayers to avoid mistakes in the handling of their tax affairs.
The first stage of the legislation – MTD for VAT – has already been successfully implemented, and requires firms that are registered for VAT to maintain digital records and use software to file their VAT submissions.
However, there were several discoveries from the cloud accountancy firm’s survey that would not have made encouraging reading for the Government. Only one in nine (11.4%) of those questioned for the research had even heard of MTD, and an additional 11% stated that while they were aware of MTD, they didn’t understand anything about it in general.
At the other end of the scale, a mere 6.5% of respondents expressed confidence that they understood how they would be impacted by MTD for ITSA.
As for what exactly was causing such a large proportion of SMEs in the UK to be uncertain about how they would be affected, more than two-thirds (66.7%) suggested the Government had failed to provide sufficient information about the legislation and how it would impact on small firms in the years to come. Just 10.4% of those surveyed said they thought the Government had done enough to explain MTD.
It’s not just MTD specifically that is causing disgruntlement
Also evident from the research was broad-based dissatisfaction with the manner in which SMEs are presently taxed in the UK; a whopping 79.5% of respondents expressed the view that the tax system should be further simplified to make life easier for small businesses.
The current structure for annual tax reporting was another source of discontent among a lot of the small business owners questioned. A mere 19.7% of those questioned – less than one in five – indicated that they wanted 5th April to remain the tax year-end date.
It seems clear, then, that for all the hugely important changes looming for small businesses in terms of how they handle their tax responsibilities in the wake of MTD, too few business owners appear to be ready, or even well-informed on what MTD is.
Are you anxious to ensure your own business isn’t one of those caught out by changes to the UK tax system that it hasn’t understood? If so, please don’t hesitate to get on the phone to TS Partners for help with self-assessment in Newton Abbot, Plymouth or Wellington from our highly professional and capable accountants and tax experts. Together, we will help ensure you are thoroughly prepared for all the implications of Making Tax Digital.
https://www.tspartners.co.uk/our-services/expert-tax-services/self-...