On a February day

22 Feb 2017

On a February day, dark and dreary, while I pondered, weak and weary, over some Tax News, that had made me sore.

Suddenly there came a tapping, then a knocking, at the Business Door.

‘Tis just the Taxman’, came a voice, ‘we came to ask for more’.

Despite warnings from just about everybody, HMRC continue to plod – no, trot – towards their Valhalla of “making tax digital” (a good idea implemented at the wrong time and in haste threatens very adverse consequences). A recent study by UK200Group has found that 65% of their members do not use accounting software, meaning a transition to quarterly reporting by 2018 through HMRC’s Making Tax Digital programme will prove problematic. UK200Group members service about 150,000 SMEs, but only 35% use software such as Sage, QuickBooks, Xero or Cashflow while 27% use spreadsheets and 22% use manual record keeping. However, 16% still use the “shoebox” method.

Richard McNeilly, chair of the UK200Group digitalisation taskforce and managing partner at a firm of Accountants, says with 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 it. Making Tax Digital represents the single most significant change to the UK’s system of taxation in recent times, and many … smaller business clients are simply not ready for it.” Andrew Tyrie, chairman of the Treasury Committee of MPs, has written to the Treasury and the FSB querying transition costs.

The FSB has estimated the change will cost £2,770 per year per business on average while the Treasury claims it will cost £280. Mr Tyrie said: “At least one of them must be wrong. If the FSB are right, the effects of MTD would be crippling for small businesses.” We are ready for this at McLean Reid, but as HMRC are being coy about whether they will increase the threshold limits or not, or if so what to, we hesitate to start recommending costs prematurely.

If they knew what they were doing, they’d know when, so rest assured that Treasury estimates are bunk. The actual cost of the shared software we can make available is well within that £280 figure, but if you do it yourself, or part of it yourself, training is required, and if we are assisting with the ongoing record keeping and quarterly filing that will involve some additional cost, however efficiently we try to implement this. Nobody at the Treasury or their expensive “big firm” consultants have more than a glimmer of understanding of the small business world, and it shows.

Our flyer on “Making Tax Digital” is available on request.