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'Lack Of Awareness' On HMRC's Digital Tax Reforms

by Amanda Banks,, London

23 August 2016

Nearly half of the UK's micro-businesses and freelancers (43 percent) are unaware of the UK tax authority's Making Tax Digital project, according to research by accounting platform FreeAgent.

To mark the publication of six Making Tax Digital consultation documents by the Government, FreeAgent asked 513 owners of UK micro-businesses with fewer than 10 employees and freelancers about whether they are aware of the changes.

Among the 20 percent of respondents who said they were aware of the project, 86 percent said they had not received enough information on the scheme. Nevertheless, 45 percent of this group were generally upbeat about the digitalization process, saying they thought it would make their lives easier. Only 20 percent said they feared it would make things harder.

Under Making Tax Digital, by 2020, most businesses, self-employed people, and landlords will be required to "keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account."

The Government has now confirmed that the reforms will not apply to unincorporated businesses or landlords with an annual income below GBP10,000 (USD13,189). It will also defer the mandatory start date of the Making Tax Digital requirements by one year for the next tier of small unincorporated businesses and landlords with annual incomes above GBP10,000 and below an as-yet undetermined threshold.

Ed Molyneux, CEO and co-founder of FreeAgent, commented: "Making Tax Digital will be one of the biggest changes made to the UK tax system for generations and will start to impact businesses from as early as 2018. But it's clear from our research that many micro-businesses still require more information about what tax digitization actually is and how it will potentially impact them."

"We've already seen some confusion in recent months about how the micro-business sector will affected by digital tax, including stories about how businesses will need to file a full tax return every three months. However, the reality is that when micro-businesses are well-informed about the changes, they are actually quite positive about them, with only a small minority of people we polled saying that they felt Making Tax Digital would make their life harder."

"Although this new consultation is certainly a step in the right direction towards helping micro-businesses understand more about tax digitization, there is still a lot of work to be done. I hope that we see even greater clarity over the plans in the future so that micro-business owners feel fully informed and, hopefully, more positive about the benefits that digital tax can provide for them."

TAGS: tax | small business | business | accounting | employees | United Kingdom | tax authority | HM Revenue and Customs (HMRC) | micro business | HM Revenue and Customs (HMRC)

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