Cost of digital tax reforms could cripple small firms
HMRC’S revolution allows software companies to ‘rip people off with upgrades that they do not need’
SMALL businesses preparing for the taxman’s “digital revolution” are facing crippling bills for new computer software, with some warning it could force them to the brink.
The changes being brought in next month are supposed to make it easier for more than a million businesses to make accurate online VAT payments.
But small business owners have told The Daily Telegraph that the chaotic implementation of the policy, just days after Brexit, is pushing them to breaking point. To comply with the changes, HMRC wants businesses to upgrade accounting software, at their own expense, to file online receipts in real time.
Accountants last night said HMRC was being too vague about its requirements and was allowing software firms to take advantage of small businesses by ripping them off for “compatible” software they do not need. In many cases, it could cost thousands of pounds a year.
Androulla Soteri, tax director at MHA Macintyre Hudson, said: “The lack of information has allowed software providers to charge businesses massive premiums for Making Tax Digital compatible software, taking advantage of their weak position and inadequate knowledge. I have spoken to clients who have been asked for initial payments of hundreds of pounds a month for software when they could pay far less by using a simple spreadsheet.”
John Richardson, an award-winning special effects freelancer who worked on Harry Potter and James Bond films, said the digital revolution was proving a nightmare. He is one of 30,000 business owners who signed up to HMRC’S pilot scheme and said he was worried about being fined after struggling to submit his January return. He said: “A task that used to take me 10 minutes now takes me three weeks. I’ve rung the HMRC helpline and they say they can’t help, speak to online services, but then they never call back. They make endless promises that they don’t keep. It is so complex that you are forced to pay someone else to do it.”
Mr Richardson has paid to upgrade his software and estimates it will cost him about £3,000 over the next year.
Meanwhile, Graham Skelton-smith, who has run the Waggon and Horses pub in Glastonbury, Somerset, for 42 years, said he was so worried about the cost of complying with the digital revolution that he might now throw in the towel. Due to the changes, he said he would for the first time pay an accountant to manage all of his finances.
“This is going to add immensely to my costs,” he said. “Even the accountant can’t tell me how much work it will end up involving. I’m in my 70s but this has been my way of life for 42 years and I don’t want to start festering away,” he said, “but this has made me consider the future of the business.”
Mr Skelton-smith was critical of “extremely vague” letters he received from HMRC, and said small business owners had been left in the dark.
The changes affect businesses above the £85,000 VAT threshold.
A Treasury spokesperson said: “Making Tax Digital will benefit businesses by transforming how they keep their records, helping them to avoid costly errors. We estimate it will cost firms an average of £31 a year each, and businesses can claim the costs of hardware and software against tax.”