British small businesses are not prepared for the major upheaval that Making Tax Digital is set to bring when it starts to come into force next month, new research has claimed.
A Federation of Small Businesses (FSB) survey of around 750 VAT-registered smaller companies found nearly half don't have the right software in place to deal with the new regulations.
VAT is the first part of HMRC's new Making Tax Digital (MTD) program, which is set to come into force for around 1.2m businesses with a yearly taxable turnover of more than £85,000 from April 1 2019.
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The FSB found 27 per cent are yet to start preparing for the changes, with an further 23 per cent have received quotes for software that will make them compliant but have still not purchased any.
The latter finding highlights the lack of applicable suppliers around today, with only 61 suppliers of "bridging software" listed on the government's MTD hub.
Putting compliant software in place this year would cost on average £564, in the form of one-off charges or an annual subscription. However for larger businesses, the costs will be higher: it is estimated those with turnovers between £500,001 and £1m will pay about £872, and those with turnovers of more than £1m will pay about £1,019.
“We’re only three weeks away from the roll-out of MTD and small businesses are clearly not prepared for it," said FSB National Chairman Mike Cherry.
"Small business owners shouldn’t be punished for honest mistakes, made more likely by a rushed HMRC roll-out. Promises were made that MTD compliance would be affordable. Now many firms are finding themselves on the hook for hundreds of pounds for software."
"At a time when small business confidence is in the doldrums – and wages, auto-enrolment contributions and business rates are rising – more costs and admin burdens are the last thing they need. They also have the small matter of Brexit to think about."
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