HMRC: making tax taxing for small businesses
The government is belatedly raising awareness of its new digital tax drive for small businesses.
The arrival of an innocuous-looking letter from HM Revenue & Customs (HMRC) this month will have been an unexpected headache for thousands of small businesses. The HMRC missive was a reminder of the launch of the first part of "Making Tax Digital" (MTD) on 1 April 2019: from that date, every business registered for VAT any firm with an annual turnover of more than £85,000 will be required to file its VAT returns using specialist accounting software.
There are a series of problems with the initiative, prompting calls for its delay, not least from the House of Lords economic affairs committee, which has just published a damning report into the launch.
One issue is that most of the promotion has focused on the accounting sector and software providers, rather than small businesses themselves. As many as 40% of businesses affected don't know anything about it, estimated the House of Lords report. HMRC's belated round of letter writing is an attempt to rectify this.
Cost figure is hotly disputed
Another challenge is that despite promises it would do so, the tax body has failed to find a software provider prepared to offer a free package. Instead, it has published research suggesting the new system will cost firms just £70 a year a figure hotly disputed by advisers to small businesses.
A more accurate estimate is £1,250 a year, once you factor in staff training as well as the price of the software itself, reckons the Institute of Chartered Accountants. The Federation of Small Businesses puts the figure at £2,770. Many small companies will also be frustrated because they are already filing their VAT returns digitally.
HMRC manages an online portal through which businesses can make their submissions, but this facility will be switched off in the move to the use of software-based VAT returns filing. Faced with mounting pressure to postpone the launch of MTD, HMRC may yet backtrack. But firms shouldn't depend on a reprieve and any delay would only be temporary. Moreover, the system will subsequently be extended to cover corporation tax and income-tax returns, possibly as soon as April 2020, so firms need to get used to it.
It's not all bad news. Accounting software for small firms doesn't have to cost the earth. Market leaders such as Xero, Sage and QuickBooks offer basic plans that cost less than £10 a month. These packages also offer some useful features, reducing the administrative burden of record-keeping and tax filings with facilities such as reconciliation with bank accounts and automated calculation of your bills.
Still, small businesses need to take the time now to assess which package suits them best and how to move to a new system. HMRC lists almost 40 compliant software providers on its MTD guidance pages, but gives no advice on which to choose.
Prizes and freebies worth your while
Forget Black Friday and the overhyped discounts it offers. If you're launching a start-up or running a small business, there are all sorts of genuine freebies and prizes available, and they're much more valuable.
Here are five offers that are currently available:
The Goldman Sachs 10,000 Small Business UK programme offers free management education for small-business owners whose firms have been up and running for three years or more. Applications for next year's programme close on 12 December.
The FedEx Small Business Grant UK competition offers a £20,000 cash prize to small businesses with a compelling proposition.
Co-Innovate is an EU-funded programme run by Brunel University in London; it offers structured business support to start-ups, including mentoring from experienced entrepreneurs, and is free.
Innovate UK is government-backed and funds industry-specific projects with valuable grants offered through a range of different initiatives. Grants start at £25,000.
The Department for International Trade is a government department with a mandate to help British businesses exportto the rest of the world. It provides companies with free access to a regional network of trade specialists and offers introductions in overseas markets.