Half of micro-business owners are unprepared for digital tax
With the deadline for submitting paper tax returns just ten days away, a new study has found that almost half of micro-business owners and freelancers are completely unaware of the government’s Making Tax Digital initiative.
The submission date for paper tax returns for 2016 is 31 October, but by April 2018, it will be obsolete, as the government rolls out the compulsory shift to digital tax.
The survey, conducted by cloud accounting providers FreeAgent, found that 43 per cent of small company owners “had no idea” what Maxing Tax Digital was.
One of the report’s key findings exposed a lack of clarity of the initiative given by HMRC. Some 86 per cent of survey respondents who were aware of the shift claimed that insufficient information had been provided to fully understand the requirements of digital tax returns.
Despite the low level of awareness, the research also found that paper submissions of financial records have become less popular among the owners of small companies.
In 2015, 340,000 fewer business owners submitted paper tax returns than in 2014, and online tax returns made up 89 per cent of the total returns made in the last tax year.
FreeAgent CEO Ed Molyneux spoke of the need for “more clarity” on the shift to digital tax returns, “so that micro-business owners feel fully informed and more positive about the benefits that digital tax can provide for them”.
In a statement, Molyneux said: “Many micro-business owners still need more information about how tax digitisation will actually work and how ultimately it will impact upon their business.
“Contrary to some beliefs, businesses will not need to file a tax return every three months in future. Instead, businesses will need to send summary data to HMRC about their business each quarter, or more often if the business prefers.”
The study revealed that when an awareness of the initiative did exist, digital tax returns were positively received. Just one in five respondents felt that submitting digital financial records would be more difficult than the current system.
Don’t miss these three steps to prepare your company for digital tax.