Start-ups and the smallest firms stand to gain the most from roll out of Making Tax Digital [REPORT]

Start-ups and the smallest firms stand to gain the most from roll out of Making Tax Digital [REPORT]

Posted: Tue 3rd Oct 2023

A new report outlines that start-ups and small businesses stand to gain the most benefit from the next roll out of Making Tax Digital.

Analysis from Enterprise Nation and think tank The Entrepreneurs' Network, supported by accounting software firm Intuit, found more than half of businesses with less than £20,000 in annual turnover said the use of digital accounting software led them to adopting other productivity-boosting technologies.

Inflation coupled with frozen allowances and thresholds (known as fiscal drag) means more businesses will now be dragged into the tax return bracket. The report highlights that not only does this add further complexity, it also acts as a brake on entrepreneurship with all the negative consequences that will have for the economy and society at large.

Making Tax Simple argues for a simplification of the tax system and urges the government to leverage digital tools to benefit small businesses and the economy.

Emma Jones, CBE, founder and CEO of Enterprise Nation, said:

“Government initiatives like Making Tax Digital are already saving VAT-registered small businesses time on their tax returns by reducing their administrative workload.

“But this report shows there are benefits to be had by bringing smaller firms below the VAT threshold into the scheme. That’s because it not only saves time taken working on tax returns, but also has a role to play in helping companies to embrace technology.

“The reality is that the UK’s complex tax system, compared to other nations, is a disincentive to enterprise. If we simplify this, we can remove barriers to entrepreneurship, allow entrepreneurs to dedicate more time to their businesses, enhance competition and ultimately benefit society.”

The report also found the UK is lagging behind other countries on tax innovation and could learn from Australia’s tax assistant ‘Alex’ or Sweden’s whole government approach to simplify procedures and give businesses better access to official information, an initiative spearheaded by the Swedish Tax Agency.

The report recommends three steps:

  • Properly resource HMRC to deal with immediate and longer-term challenges. At the same time, we should think about the need for longer- term projects, not least the next stages of Making Tax Digital (MTD).

  • Make sure the Government Gateway delivers. For too many business owners, Government Gateway isn’t working. Whether it’s the need for multiple profiles, the absence of data- sharing between government departments, or a failure to provide all the services entrepreneurs require, improvements are needed.

  • Lead the world on the use of virtual assistants and artificial intelligence for paying taxes. The Government is alert to the potential for virtual assistants and artificial intelligence (AI) in making tax simpler to pay. However, we’re lagging behind other countries like Singapore, Australia and Estonia. Given the UK trails only the US and China as a global hub for AI, failure to compete is not for want of talent or expertise.

Download the full Making Tax Simple report

Enterprise Nation has helped thousands of people start and grow their businesses. Led by founder, Emma Jones CBE, Enterprise Nation connects you to the resources and expertise to help you succeed.

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