Making sure you stay on top of your taxes can be a challenge for SMEs. Business owners are juggling many balls and this is just one more to add to the mix. But it’s an important one.
It’s therefore concerning that research published by Receipt Bank and shared by Accountancy Age found that 27 per cent of UK SMEs missed that 31 October tax deadline set by HMRC for paper returns.
One in three SMEs are also making things more stressful than they need to be by leaving their financial admin until the last minute, the survey found.
Adrian Wilson, CEO of Receipt Bank, told the news provider that businesses are being held back because they’re overpaying tax and are spending too much time on manual admin related to this financial process.
He stated: “Small British businesses are spending 120 hours a year on finding and filing their financial paperwork – leading many to lose control of their balance sheet and 27 per cent to give up more money than needed to the taxman because they’ve missed deadlines.”
Despite the government and HMRC pushing the Making Tax Digital (MTD) initiative, many businesses still file paper returns.
Speaking to the news provider, partner at Saffery Champness Zena Hanks explained that there are several reasons why businesses might still opt for paper returns.
One is that they don’t have access to the internet, another is that they simply don’t want to use the online system, or finally that the online tax system from HMRC doesn’t calculate tax liability correctly, necessitating a paper return.
She stressed that although the HMRC online system is making strides towards improving the efficiency of filing a tax return as a business and individual, more work needs to be done to “overcome the increasingly complex tax system”, particularly where multiple calculations are needed in more complex cases.
For many SMEs the issue is that they don’t have the budget of larger companies when it comes to investing in solutions to make their tax filing easier. As R and D tax experts, we can help if this is an area you’re struggling with.
A recent article for Economica noted that many businesses have seen benefits from moving to a digital system, after the government introduced legislation that came into force in April this year requiring all VAT-registered businesses with a turnover greater than £85,000 to keep digital records and submit returns with HMRC using software that’s MTD compliant.
Despite initial resistance in some areas, many SMEs who have adopted the new MTD approach report that it’s made it simpler and easier to manage their tax affairs with HMRC. In fact, new research found that over half of all SMBs in the UK now believe that this will have a positive impact on their business.
It’s also given more SMEs the confidence to file their own tax returns, with one in three reporting that this is the case, while one in seven said that they believe they can have better conversations with their accountants and bookkeepers after switching to the MTD system, the research from QuickBooks found.