Adapting to HMRC’s Making Tax Digital (MTD) for VAT regime could cost the UK’s small businesses up to £3,500.
HMRC research found that businesses incurred costs when:
- investigating software options.
- purchasing the software and upgrading IT systems.
- accountants’ services were required for tasks such as checking submissions and training staff on how to use the software.
The report, ‘Exploring the costs and benefits of Making Tax Digital for VAT experienced by small businesses’, found that the cost of software ranged significantly. Bridging software was typically the cheapest option, costing around £40 a year.
Prices ranged widely for full software packages. Basic ones were reported to cost a minimum of £6 a month, whereas full accountancy packages (where MTD compatibility was included as part of broader accountancy functions) were reported as costing up to £3,500 a year.
Those using these types of packages were already software users, typically with relatively complex accountancy needs who understood that they needed to spend more to manage their finances.
In the middle of these were intermediate packages, costing approximately £30-40 a month. These packages provided additional functionality in addition to MTD compliance, such as allowing more user access and the ability to work across different currencies.
The report stated: “We did not find a great deal of negativity around the financial costs of software, rather the time and emotional cost required to engage with making a choice of bridging software or full software and which brand or package within this.
“Whilst the overwhelming array of software options may not be in HMRC’s hands, providing more guidance and signposting on how to navigate this would help to reduce a significant transitional cost and to support small businesses who feel out of their comfort zone.”
- You can find HMRC’s report at https://tinyurl.com/3zu6hu46