The move towards a digital tax system is deterring micro-businesses

More than two thirds think the tax system is becoming more digitally focused, while 29 per cent have begun using third party accountancy support to cope, according to AAT (Association of Accounting Technicians) research.

Some 20 per cent regard the process of completing a tax return as too complicated and should be simplified. A similar number believe that larger businesses are advantaged as they have more resource to spend on specialised support.

The introduction of Real Time Information (RTI) has placed added pressure on the SME community, especially micro-enterprises, and it will be essential for these businesses to be fully conversant with RTI and digital if other legislative changes such as Universal Credit are to work as intended. 

But these changes are costly not only financially but administratively to small business owners. This indicates that the move to bring everything ‘online in real time’ is yet another challenge for them to overcome. 

One in ten filed their latest self-assessment tax return using the paper filing method despite the incentive of a later deadline for electronic returns. Of those, nearly 72 per cent were capable of doing it online but preferred the traditional approach.

Respondents identified the HMRC website as the most common way to seek help with their business’ tax affairs, but nearly 61 per cent have never used or considered using technical solutions – basic accounting IT packages and free downloadable resources – to conduct their tax affairs online.

Director of professional development at AAT, Adam Harper, said: “It’s clear that conducting one’s tax affairs online is a time consuming and daunting process for some and this has caused many micro businesses to either stick to old methods that they are more comfortable with or seek third party support. 

“Many are capable of filing online but choose not to, and the majority don’t use technical solutions that have been designed to make their lives easier. If we want an ‘entrepreneurial UK’ in which startups thrive then we need to simplify the process and offer more support to those that need it, and ensure that ‘tax isn’t taxing’. No business should feel digitally excluded and more needs to be done to engage those most at risk of being left behind.”

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