First six months of MTD compliance generated £815m for SMEs

First six months of MTD compliance generated £815m for SMEs

Report claims that small businesses have benefited from MTD through increased productivity and growth, generating over £815m over six months after its compliance.

First six months of MTD compliance generated £815m for SMEs

According to a study released by Intuit QuickBooks, HMRC’s Making Tax Digital (MTD) has helped small businesses in the UK to generate over £815m in productivity gains over a period of six months since its enactment.

The results claim that almost a third of small businesses have adopted new digital services or products since becoming MTD compliant, meaning that the ‘digital snowball’, forecasted by Volterra Partners as a driver for productivity amongst SMEs, has taken place.

The findings also highlighted an increasingly positive attitude towards MTD since mid-2018:

  • Three in five businesses now favour MTD being applied to other forms of tax
  • Over half believe a wider roll out would save them time and increase productivity
  • Two in five businesses see MTD as having provided them with a more accurate view of their company’s finances
  • A third say switching to MTD compliant processes has not been complicated

Chris Evans, VP and UK Country Manager at Intuit QuickBooks commented: “Adopting digital tools is essential for any business looking to grow and succeed in the modern world.

“Today’s findings are encouraging and show that the transition to digital has already led to tangible benefits for some businesses, such as streamlined operations, simplified tax and enhanced cash flow management.”

If digital transformation is taken a step further by HMRC, to cover both Income Tax Self-Assessment and Corporation Tax, it could lead to an even greater uptake and acceptance of digital tax.

Benefiting from MTD

The results from Intuit Quickbooks’ report show that not only does MTD enable improved invoicing facilities, but it also generates simpler data sharing with a company’s accountant in general, enhancing the highly beneficial aspect of the digital shift.

Andrew Moyser, Partner at MHA MacIntyre Hudson, believes small businesses should adapt to new technologies to ease their accounting process and produce further productivity, saying: “Businesses that use accounting software typically have greater visibility of their results and can quickly identify any anomalies within their business, which can help drive improvements and growth.”

Moyser also highlighted the growing trend for SMEs adopting new accounting software: “Making Tax Digital and the increasing digitalisation means that over time the use of robust accounting packages is going to become increasingly vital. We expect to see most businesses using software within the next three to five years.”

An opportunity for growth

Whilst certain small businesses remain reluctant to the new process, the Intuit QuickBooks report disclosed that 10% of business owners risk breaching the law by keeping VAT transactions in paper journals.

Focusing on the potential growth of businesses complying with MTD, Evans added: “Businesses that fail to adopt new technologies are at risk of losing out to the agility of those with a digital-first mindset. Our research shows us that those progressive business that take the first step to embrace digital will increase their prospects of long-term growth.”

The study showed that 30% of those favouring MTD believed it could help generate business growth and the digitalisation of the company. Over two thirds of all SMEs also perceived the positive effect of digitising other areas of tax whilst combining tasks into one.

Uncertainty amongst SMEs still present

Yet, signs of reluctance from small businesses are still evident.

In a study conducted by Capterra, an online B2B provider company, it was found that 55% of small businesses and self-employed people from various industries do not feel confident in their MTD understanding.

Above all, the findings showed that 47% of respondents are still employing Google Sheets or Excel when keeping their accounts disclosing that the spreadsheet remains the most used tool for small businesses accounts whilst 42% use accounting software.

When asked about the difficulties of compliance to MTD, small businesses shared that the lack of information to be the strongest cause of reluctance, followed by the cost of finding new software or upgrading (15%) and finding a compliant software (13%).

Mariah Tompkins, Director of accounting firm WKM Accountancy Services concluded: “Some small businesses know that Making Tax Digital is a priority, but they aren’t really sure where to start.”

The Intuit QuickBooks study report can be downloaded here.

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