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UK SMBs are not ready for Making Tax Digital

(Image credit: Image source: Shutterstock/Creativa Images)

British small businesses could be set to incur large costs in order to ensure they pay their taxes correctly under new government rules, a new report has claimed. 

New research suggests nearly half of UK's small businesses that earn enough to have to pay VAT, don't have the proper software set up for the government's Making Tax Digital initiative (MTD) - the first part of which comes into force next month.

Making Tax Digital is simple in premise – the country's businesses need to digitise their bookkeeping and file quarterly reports digitally, as well.

However, in order to do that, they need new software, and that doesn't come free. The report claims that 27 per cent (out of 750 VAT-registered small businesses polled) haven't even begun preparing for the changes, and 23 per cent have received quotes for software to make them compliant but not made any purchases.

The research, conducted by the Federation of Small Businesses (FSB), said that not only half of small businesses don't have the right software, but also that this software costs almost £600 to buy and install.

Another roadblock to implementation is the fact that there aren't enough solutions available, apparently. There are some 220 listed on the MTD page, launched last july, and 61 so-called 'bridging solutions'.

FSB national chairman Mike Cherry said that firms were finding the process "far more difficult, time-consuming and expensive".

Image source: Shutterstock/Creativa Images