A recent national survey conducted on behalf of the ICAEW has yielded some worrying results for the government’s Making Tax Digital (MTD) plans.
In short, businesses aren’t ready.
Five hundred UK businesses were asked in the survey how they keep their financial accounting records at the moment: Just a quarter of respondents currently maintain their accounts electronically using accounting software.
As the ICAEW noted, “The rest will therefore need to consider what changes they may need to make, almost certainly incurring considerable costs to comply with the new rules”.
AccountingWEB consultant tax editor Rebecca Cave also raised concern in a recent article: “[M]oving to a commercial software package will mean extra costs and data transfer problems for many businesses who have created their own bespoke accounting software, or who rely on Excel spreadsheets.”
In the same piece, accountant Della Hudson disagreed with the perception that paper records were necessarily inaccurate: “…I still have clients who have no internet connection or computer, but keep beautiful handwritten ledgers”.
ICAEW’s research shows that 82% of one-person businesses will need to shift to digital recordkeeping. The manufacturing and construction industries, in particular, will have to pivot: 41% still rely on paper-based records.
The Institute has gone on the record to say that while it supports MTD, it shouldn’t be compulsory. And from the survey results, it would seem UK businesses agree with them. More than half of those surveyed support the general trend toward a digital tax administration - but only 18% of businesses felt that it should be made compulsory.
MTD has started to take form. We know that from April 2018, small, non-VAT registered businesses will be the first UK businesses to have to comply with MTD. The rules will make digital recordkeeping compulsory, as well as the much vaunted “quarterly return”. By 2020, the aim is for the UK’s tax administration to be fully digital.
About Francois Badenhorst
I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter.