In a new report, it has been found that the government’s Making Tax Digital initiative has resulted in significantly increased costs and admin burdens for smaller sized businesses.
This is according to findings from the FSB’s (Federation of Small Businesses) recent publication ‘A Duty to Reform: Making tax work for small businesses in a digital world’, which revealed that for SMEs participating in the Making Tax Digital (MTD) programme the average cost of tax compliance is £4,562. For those yet to join, this figure is at just £2,960.
So far, seventy per cent of small businesses have made the MTD switch; among them, 71% say that the move has resulted in increased costs and time lost to learning new processes.
FSB National Chairman Mike Cherry, said, “Small businesses are fully behind the government’s vision for a high skill, high productivity, low tax economy. With costs soaring, and the Budget approaching, it’s now time to see the policies that will get us there.
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Email Jaime“Reducing the huge amount of time and money lost to tax bureaucracy would free up billions for investment, upskilling and digitalisation. We’ve always said that – rolled-out in the right way – MTD could mean productivity gains over the long-term.
“However, for many of those who’ve already taken the plunge, the programme has so far yielded higher costs and greater complexity.”
The report also found that the requirement to register for VAT once a firm has £85,000 of turnover serves as a barrier to growth for one in four (24%) firms.
Commenting on this, Cherry said, “As things stand, more than a million firms say they’ve stopped growing their turnover because of the VAT threshold. If we want the economy firing on all cylinders again, reform of this levy – seen as the most burdensome of all by firms – is a must. We must stop the £85,000 turnover threshold serving as a ceiling to the growth we desperately need.”
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