Business owners tired of rummaging through bags full of receipts every January may soon have a promising alternative, as long as they can face one more rule change.
Imagine a world where January 31st is no longer a dreaded date; where annual tax returns no longer exist and tax can be handled on a pay-as-you-go basis to protect cash-flow.
This might sound like horribly-paraphrased John Lennon lyrics, but it’s getting closer to reality. Earlier this year, HMRC introduced a digital tax system that will enable 5 million small businesses to have complete control over their tax affairs by the end of 2016, and 50 million by 2020.
The idea is to make tax less intimidating to small business owners and provide more certainty about what needs to be paid and when, with a pay-as-you-go option to alleviate cash flow pressures.
These digital accounts are similar to online banking portals, designed to be accessible to a wide range of users. However, recent ONS statistics show that only 56% of UK adults currently use internet banking, leaving at least 30 million people either unwilling or unable to access their finances in this way. So it might not be for everyone.
It’s easy to picture entrepreneurs as tech-savvy Mark Zuckerberg types, but small business owners come from all walks of life. The FSB’s last UK Voice of Small Business member survey showed that 47% of their members are aged 55 or over and 12% fall into the 65+ age bracket. And though internet use by over 55s has increased year-on-year, almost tripling in the past decade, there’s still a significant proportion of small business leaders who may not be comfortable with managing their business online. This is suggested by the fact that a sixth of SMEs still don’t have a website.
In addition to the issue of digital literacy, there is also the question of trust and access.
Francis Maude said in the Government’s 2014 Government Digital Inclusion Strategy, “We need to equip the whole country with the skills, motivation and trust to go online, be digitally capable and to make the most of the internet.” The sentiment is good, but more needs to be done to enable the last few hesitant or isolated individuals to embrace online schemes such as this.
It is to be hoped HMRC keeps its promise to provide extra help and support for those who have difficulty in going online or who need additional support. With more than 1,000 small businesses having assets seized in 2015 to settle late tax bills, anything that can be done to help simplify this process will be very welcome.
If you enjoyed that, why not read...