22nd February 2017kcopple0 Comments.5 minutesArticles
According to a recent survey from UK200Group, 65% of its members’ clients don’t use software to manage their accounts despite the Making Tax Digital scheme expected to come into place by next year.
The Making Tax Digital scheme will see businesses forced to change the way they manage their finances. Businesses will have to do quarterly reports on their accounts, as opposed to end-of-year accounts, and submit them digitally to HMRC.
The UK200Group has a membership of over 150 accountancy and law firms with about 150,000 SME clients. The survey found that only 35% use software for their accounts. 27% said that they used computers for bookkeeping but will need to update their systems. 23% still use manual bookkeeping.
16% of business owners claim to still be using the “shoebox-method” which means that their accountant fills in details for the end of year tax return. These owners will find they have to change the most. They’ll have to face drastic changes to the way they manage their accounts and have to adapt to both digital reporting and quarterly reporting too.
Though they’re not required to report digitally yet, the expected deadline is getting closer. This could lead to an expensive transition for many companies, some of who aren’t even aware of these changes yet. It will mean some SMEs having to purchase the appropriate software and retraining staff to use it.
The UK200Group has recognised the difficulties that Making Tax Digital will have on SMEs. It has set up a Digitalisation Taskforce in order to help businesses deal with the transition to digital reporting.
Chair of the UK200Group Digitalisation Taskforce, Richard McNeilly said: “The ‘shoebox method’ users will have to learn how to keep records, invest in software and then spend time inputting the data they collect into the software.
“Making Tax Digital represents the single most significant change to the UK’s system of taxation in recent times, and many of our smaller business clients are simply not ready for it. The change to quarterly reporting will require all businesses to change their habits, but over half of the firms we surveyed are also going to have to change the systems they use to record data.
“If HMRC remains committed to having businesses report and pay their tax digitally by 2018, small businesses have only a short period of time to update their systems and many are still unaware that Making Tax Digital is underway.
“That is why the UK200Group has launched the Digitalisation Taskforce. When changing to new systems and processes, the first person most business owners will turn to will be their accountant. As trusted business advisers, we need to be ready to make the transition as easy and painless as possible.”
The UK200Group recommended that changes are made to the MTD scheme. Their main consideration was that SMEs have not been given a sufficient amount of time to prepare for changes.
They warned HMRC that SMEs ability to implement MTD changes had been overestimated. There have also been conflicting reports on how much this will actually cost businesses.
Richard McNeilly added: “Businesses using software are almost there, and the only major difference will be quarterly, rather than annual, reporting. Those using Excel spreadsheets will need to upgrade their systems but already have experience of computer input. Even if a business is still keeping manual records that experience of record-keeping will be transferrable, although digitalisation may cause some pain.”
Are you worried about getting ready for MTD? Should SMEs be given more information? Let us know what you think of it in the comments!