SMEs at a loss in UK Gov's new plan to rush tax digitisation

SMEs at a loss in UK Gov's new plan to rush tax digitisation

Lee Murphy

owner at Pandle

Views 195

SMEs at a loss in UK Gov's new plan to rush tax digitisation

17.01.2017 10:00 am

The UK government’s call to digitise tax returns by April 2018 has faced backlash as MPs warn that the plans are being rushed through without proper preparation taking place. Improper implementation of this system will inevitably cause errors in the submissions process, which may create chaos in our tax system. HMRC tend to have weak systems in place even for systems in place for many years. Therefore a rushed system developed by HMRC will cause taxpayers, companies and HMRC lots of issues.

A survey recently found that in the last two years, 19% of those who filled in a self-assessment tax return believe they made an error or not understood the document correctly and lost out financially as a result. Such mistakes can cost 20-100% extra tax due so it’s important the government takes the time to educate individuals and businesses alike to the changes digitisation will bring.

Ideally, tax digitisation should be introduced for limited companies first, followed by individuals, instead of the other way around, which is currently planned. It would also be beneficial if another few years were added to the timescale to ensure it is implemented correctly.

Additionally, by introducing other measures first, such as the requirement for VAT submissions to be made through accounting software, businesses would have some time to get into the habit of using accounting software in preparation for tax digitisation.

At present, only around 25% of businesses use accounting software and for the government changes to see a smooth transition this number really needs to increase. If SMEs moved over to accounting software now, then by the time tax is digitised it would only be a matter of clicking a few buttons every quarter. It’s down to the government to ensure that business are prepared for these changes so that their bottom lines are not affected by small errors made online.

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