Britain’s micro businesses and the self-employed are feeling the effects of a more digital based tax system with 39 per cent 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 1,000 self-employed and micro businesses with less than 10 employees, showed more than two thirds (68 per cent) think the tax system is becoming more digitally focused and just under one third (29 per cent) have begun using third party accountancy support to cope.
One in five (20 per cent) regard the process of completing a tax return as too complicated and should be simplified. A similar number (21 per cent) 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 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 (49 per cent), but nearly 61 per cent have never used or considered using technical solutions (such as 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.
“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.”
Anthony Thomas chairman of the Low Income Tax Reform Group [LITRG] commented on the research: “The findings come as no surprise. We in LITRG believe that Government has wholly underestimated the extent of the difficulties experienced by many small and micro businesses in going online, whether by reason of age, disability, geographical remoteness or simply through choice. When combining the AAT findings with our own research, the Government’s aggressive timetable to becoming ‘digital by default’ becomes even more of a challenge and a real worry to those who are disengaged.”
The key findings of the research of 1,000 self-employed and micro-businesses include:
• A majority (39%) of micro businesses and the self-employed feel excluded by a digital based tax system and lack the resource and understanding to keep up.
• 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.
• One in five (21%) believe that larger businesses are advantaged as they have more resource to spend on specialised support.