HMRC is continuing to field questions regarding the potential cost of Making Tax Digital (MTD) to businesses, especially small businesses.
The Government has estimated the transitional cost of MTD will be £280 per business – much lower than the estimate given by the Federation of Small Businesses (FSB) at a cost of £2,770 per year per business.
This has prompted the Chairman of the Treasure Committee, Rt Hon Andrew Tyrie MP, to write to both HMRC and the FSB – asking for clarity on costs, as well as further information and details of the methodology used to explain how they both arrived at such contrasting figures.
Commenting on the correspondence, Mr Tyrie, said: “The compliance cost estimates are so far apart that at least one of them must be wrong. I have written to both the Treasury and the Federation of Small Businesses to ask for detailed supporting methodology for their estimates.
“If the FSB are right, the effects of Making Tax Digital would be crippling for many small businesses. If the Government are right, businesses have something to gain in the longer term and one would expect them to be queuing up to join the pilot.”
What is the true figure?
Accountants, tax and business advisors, Lamont Pridmore, have estimated the cost at £1,250 per year based on their assessment of software and accountancy costs – meaning the UK SME sector is likely to face a bill of £3.2 billion a year.
What do you think?
Ahead of the Budget, when final details on MTD costs and implementation are due to be revealed, and we get answers on the final threshold exemption for MTD-exclusion, Thomson Reuters asked you, UK accountants and agents, to tell us what you think MTD will cost small businesses.
480 UK accountants answered the question: what do you estimate will be the cost of Making Tax Digital to your individual SME clients?
- 46% of accountants and agents said between £200-£500
- 27% estimate it will cost between £500-£1000
- 9% more than £1,000
- 4% think it will cost less than £200 and 14% don’t know.
Based on these results, it would seem that that there is more agreement with HMRC’s assessment on likely costs.
Yet, until we know for certain what businesses will be exempt from MTD, the turnover limit exception (will it be £83,000?) and which businesses will be deferred until 2019, who really knows what the final figure will be and which of your clients will be impacted?
Even so, I urge you to contact your software supplier, and put your name down to join the public software beta starting in April. Thomson Reuters Digital Personal Tax customers can apply to take part in HMRC’s beta program by completing this short survey to register their interest.
The public beta will provide accountants with a real understanding of MTD and how it will directly impact (savings and costs, the positives and the negatives) you, your practice and clients, and its potential to deliver longer-term gains. MTD is happening. The key now is to make it work for you and your clients.
Mark Purdue tax product manager at Thomson Reuters, has spent over 25 years' working in tax and specialises in Personal and Capital Gains Tax.