New research by FreeAgent suggests that SMEs need more clarity on HMRC’s plans to transform the tax system through digital technology.
Under HMRC’s tax digitisation plans, SMEs and freelancers will be required to keep digital financial records and provide HMRC with quarterly tax updates.
Despite HMRC announcing six new consultations about tax digitisation last week, 43% of micro-business owners and freelancers still don’t know what Making Tax Digital is and how it will affect them.
FreeAgent added that the majority (86%) of those who are aware of HMRC’s Making tax Digital campaign, have not received enough information about the plans and how the government’s proposals will affect small business owners.
Despite a lack of clarity, only 8% of those surveyed said they feel negatively about the government’s digitisation plans while 27% feel positive about the proposals.
Almost half of respondents (45%) think the changes will make life easier, while 20% think it will make life more difficult.
Announcing the six consultation documents, HMRC pledged its tax digitisation plans will make paying tax less burdensome.
The Revenue also revealed that 1.3 million small businesses and landlords with modest turnovers will be exempt from digital-record keeping and quarterly updates, in addition to the 1.6 million small businesses and landlords already excluded from the proposals.
This decision follows months of constructive engagement with business and agent groups.
HMRC also revealed that the government is considering deferring digital record-keeping and quarterly updating for a further group of small businesses and will explore options to assist businesses with the transition.
Mike Cherry, national chairman of the Federation of Small Businesses welcomed the announcement.
“Together with the chief secretary David Gauke, we have seen real dialogue with the business community. The government has listened to FSB representations on behalf of small businesses up and down the UK.”
The consultation documents also confirmed that those who cannot go digital will not be required to.
Edward Troup, executive chair, HMRC, said, “Making Tax Digital represents very significant change. It will bring the tax system into the 21st century and help make HMRC one of the most digitally-advanced tax administrations in the world.
"Going digital will abolish the annual tax return as we know it by 2020, replacing it with a personalised digital service through which taxpayers will be able to send and receive information to HMRC at the click of a button.
“There is still a lot to design and develop, and it’s important that we do this hand-in-hand with our customers and their representatives; these consultations are the next step in this process.”
Ed Molyneux, chief executive and co-founder of FreeAgent said, “Although this new consultation is certainly a step in the right direction towards helping micro-businesses understand more about tax digitisation, there is still a lot of work to be done.
"I hope that we see even greater clarity over the plans in the future so that micro-business owners feel fully informed and, hopefully, more positive about the benefits that digital tax can provide for them.”