SMEs could benefit to the tune of as much as £57 billion, over the next five years, thanks to productivity improvements associated with HM Revenue & Customs’ (HMRC) Making Tax Digital (MTD) initiative.
Research firm, Volterra Partners, anticipates a ‘digital snowball’ effect following the launch of MTD for VAT (MTDfV) in April this year.
The report follows the logic that businesses will experience a whole host of ‘spill-over’ benefits, such as improved cash flow and more streamlined HR processes.
This will ultimately result in more time freed up to concentrate on promoting growth through sales, marketing and training.
The £57 billion bolster is based on the expectation that the Government will eventually extend MTD to other taxes; however, if it turns out that MTD is to be restricted to VAT alone, the total benefit to SMEs is expected to be around £46 billion.
Chris Evans, VP and UK Country Manager at Intuit QuickBooks, which commissioned the research, said: “Today’s report highlights that a digital-led approach will be transformational for small businesses, who are the backbone of the economy.”
“For those businesses, the transition to digital will not be without stumbling blocks. However, it presents a huge opportunity to streamline operations, drive efficiencies and simplify tax. It will enhance cashflow management and allow them to get paid faster and access capital to grow, powering prosperity across the UK.”
Despite the anticipated gains to be made by embracing digitisation of traditional business functions, a worrying number of SMEs are still unaware of MTD and its associated impact.
VAT-registered businesses, with a taxable turnover above the VAT threshold (£85,000), must submit their VAT return for the first VAT period commencing on or after 1 April 2019 under MTD rules. These businesses will be expected to keep digital records and submit their VAT using HMRC-compliant accounting software.
In the Chancellor’s Spring Statement, which he delivered on 13 March, he also confirmed that MTD would not be extended to any other businesses or taxes until the MTDfV system had been shown to work well, and not before 2021 at the earliest.
The Government’s previous intention had been to mandate MTD for other taxes by 2020.
In addition, a ‘soft-landing’ approach to penalties will be taken in the first year following the implementation of MTDfV.
Martin Williams, partner at George Hay, said: “Businesses within the scope of MTDfV should have already made, or be making the necessary preparations ahead of the 1 April implementation date.”
“The limited ‘breathing space’ that the Government seem to be affording, by way of its latest announcements, should not give businesses reason to be complacent.”
“The digitisation of key business functions could be transformational for SMEs, but only if they are prepared to embrace the opportunity fully. Those lacking in a progressive mindset risk losing their competitive edge in an already challenging economy and are likely to find long-term growth less attainable.”
Here at George Hay, we want to see the businesses we work alongside continue to thrive following the implementation of MTD and we are already helping many of our clients to look at it as an opportunity, not something to oppose.
We can help you when it comes to choosing and implementing a system matched to your businesses requirements and we can provide professional advice throughout the transition and beyond.
We are able to work with a range of online accounting software packages so, when it comes time to take the leap, we have trained advisers on hand to provide as much or as little assistance as you require.
To discuss your circumstances in more detail with one of our experts, contact us today. To read more about MTD, why not take a look at our handy summary of the story so far, here or explore the MTD page on our website here.