SME’s struggling to adapt to digital tax systems

Money Posted 25/10/13
Calls are made to simplify the tax returns system

The region’s businesses and the self-employed are feeling the effects of a more digital based tax system with 39% saying they feel excluded and lack the resource and understanding to keep up, according to new research from AAT (Association of Accounting Technicians).

A survey of 1000 self-employed and micro businesses with less than 10 employees, showed more than two thirds (68%) think the tax system is becoming more digitally focused and just under one third (29%) have begun using third party accountancy support to cope.

One in five (20%) regard the process of completing a tax return as too complicated and should be simplified. A similar number (21%) 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.

Research AAT conducted earlier in the year clearly indicated that these changes are costly not only financially but administratively to small business owners. This new set of research indicates that the move to bring everything ‘online in real time’ is yet another challenge for them to overcome.

One in 10 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 three quarters (72%) 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 (49%), but nearly 61% have never used or considered using technical solutions (such as basic accounting IT packages and free downloadable resources) to conduct their tax affairs online.

Adam Harper of AAT said: “While reporting digitally and in real time will be hugely beneficial in the long-term; we do have to cater to the fact that not all small business owners are digitally as engaged as others. 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.”

Tweets from @SEBmagazine