Digital tax returns hurt small businesses in their pockets

In fact, the introduction of Tax Digital, the government’s digital tax return service, costs small businesses 50 percent more than those who have yet to migrate.

The government said the digital tax return would mean it would be easier for small businesses to simplify and “get their tax rights,” but the Federation of Small Businesses found the average annual cost of £ 4,562 for participating businesses significantly higher are than for those still migrating (£ 2,960).

This is because signing up with Making Tax Digital means subscribing to compatible software, the cost of which has significantly increased compliance costs, the FSB said. These costs could rise as the 2024 initiative extends to the self-employed and all businesses paying corporate tax in 2026.

> See also: Stop Micro Business Making Tax Digital Adoption, Urge MEPs

Seven out of ten (70 percent) of small businesses have switched to Making Tax Digital. Among them, a similar proportion (71 percent) stated that the move resulted in increased costs and lost time learning new processes.

The government said digitization would improve the efficiency of the tax system, reduce errors and give companies more control over their finances.

It is said that the initiative will ultimately make it easier for companies and individuals to “keep track” and lead to increases in productivity. It is said that politics is a “reshaping of the tax administration”.

> See also: All small businesses should digitize taxes by 2024, suggests the Ministry of Finance

VAT companies with taxable sales greater than £ 85,000 must follow the rules by keeping digital records and using software to file their VAT returns, while VAT companies with taxable sales below the Making Tax Digital threshold must join April 2022.

Self-employed businesses and landlords with business or property incomes in excess of £ 10,000 will be required to follow the rules for digital income tax filing from April 2024. The directive will not extend to corporate income tax until at least 2026.

Even companies not yet in the grip of Making Tax Digital spend an average of £ 4,100 and 52 hours per year on tax compliance.

This means that small businesses are spending a total of £ 25 billion a year on tax compliance – a figure that doesn’t account for the 300 million man hours spent creating and filing records.

Mike Cherry, FSB national chairman, said, “For many of those who have already taken the plunge, the program has been more costly and complex.”

Continue reading

9 accounting software platforms for digitizing taxes

Leave a Comment