Yahoo Finance 300,000 small businesses not prepared for new VAT legislation
Some 297,000 small businesses in the UK are not ready for new VAT digital tax legislation that will come into force in four months time, even though the change is likely to benefit them.
From April 2022, VAT-registered businesses with a taxable turnover of less than £85,000 ($112,422) — the last group to require compliance — will have to keep digital records and use software to submit their VAT returns.
This is part of the government's Making Tax Digital (MTD) strategy to make it easier for individuals and businesses to get their tax right.
The change is due to impact 1.1 million small businesses in the UK. Of the eligible small businesses surveyed by QuickBooks that are not yet compliant, 41% surveyed said they were delaying making the necessary changes.
“It’s human nature to delay things we find stressful, and QuickBooks’ research shows small business owners find their VAT returns particularly taxing,” the report said.
On average, small business owners spend four hours a month worrying about their VAT returns — the equivalent of more than half a working day — and for one in five (20%) this rises to over 7 hours, or a whole working day.
This has a huge impact on owners’ wellbeing, with a third (33%) of those experiencing stress around VAT returns, and even losing sleep over it.
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Some 43% of small business owners say they could generate revenue more effectively if they weren’t spending time worrying about their VAT returns, while 41% say they could be more effectively growing their business.
QuickBooks’ research also found that going digital will ultimately help prevent the ongoing cycle of tax stress. The majority (58%) of small business owners agree that using digital software reduces, or could reduce, stress when filing VAT returns.
The main benefits of using software to complete VAT returns are that it’s quicker (42% surveyed agree), more accurate (39%) and more efficient (38%) than using older methods like spreadsheets. It also makes it easier to keep up with regulatory changes (34%).
“Using digital software for VAT can actually reduce stress by automating the process, therefore minimising the time spent, improving efficiency and ensuring returns are accurate,” said Pauline Green, head of product compliance & programs at QuickBooks.
"Software also provides real-time insights into finances, helping to build better habits and financial awareness," she said.
"If they prioritise becoming MTD compliant, small businesses will start to experience these benefits and eliminate tax worries — allowing them to focus on building a successful business.”
