Concern about the impact of digital tax plan on small businesses

Small business experts have warned that plans to digitise the tax system will place a significant burden on Britain’s SMEs.

The Commons Treasury Committee has been hearing evidence about the likely impact of the Making Tax Digital initiative and in particular the effect it will have on smaller operations.

Having heard from a number of business and tax experts, the Committee’s chairman, Andrew Tyrie MP, said that a requirement for companies to complete quarterly digital tax returns had the potential to have a “very adverse” effect on SMEs.

Mike Cherry, the current chair of the Federation of Small Businesses (FSB), was among those to warn the committee about the possible implications.

He argued that it would make more sense to implement the digital arrangements by 2025, allowing more time for businesses to make the necessary preparations for the transition and subject the new system to proper tests.

“Many small businesses are certainly not aware that this is coming. It’s creating a perfect storm in the wake of the National Living Wage and auto enrolment,” said Mr Cherry.

“We absolutely agree with the [MTD] pathway, but over a much, much longer period of time that businesses can get to grips with.”

While HM Revenue & Customs (HMRC) has argued the new system would ultimately mean significant savings for SMEs, critics have suggested there is little evidence of any benefit in the short to medium-term.

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