Online tax admin problematic for micro business, says AAT

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The UK’s smallest businesses view online tax administration as costly and difficult to operate, and there is a risk that many will fail to engage with the government’s ‘digital by default’ approach, according to research by the Association of Accounting Technicians (AAT), reports chartered accountants Northampton Harris & Co.

A survey of 1000 self-employed and micro businesses with less than 10 employees, showed more than two thirds (68%) think the tax system is becoming more digitally focused, while over a third (39%) say they feel excluded and lack the necessary resources and understanding to keep up. As a result, 29% have begun using third party accountancy support to cope.

One in five (20%) regard the process of completing a tax return as too complicated and should be simplified. A similar number (21%) believe that larger businesses have an advantage as they have more resources to spend on specialised support.

One in 10 filed their latest self-assessment tax return using the paper filing method despite the incentive of a later deadline for electronic returns. Of those, nearly three quarters (72%) were capable of doing it online but preferred the traditional approach.

Respondents identified the HMRC website as the most common way to seek help with their business tax affairs (49%), but many (61%) have never used or considered using technical solutions (such as basic accounting IT packages and free downloadable resources) to conduct their tax affairs online.

The AAT says the research indicates that moves to bring everything online in real time, which includes the HMRC’s Real Time Information (RTI) system as well as planned changes such as Universal Credit, will create significant challenges for micro businesses.

Adam Harper, director of professional development at AAT, said:

‘While reporting digitally and in real time will be hugely beneficial in the long-term, we do have to cater to the fact that not all small business owners are digitally as engaged as others. Many are capable of filing online but choose not to, and the majority don’t use technical solutions that have been designed to make their lives easier. No business should feel digitally excluded and more needs to be done to engage those most at risk of being left behind.’

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