How small business can afford the cost of new VAT rules compliance
Making Tax Digital comes into effect in April and the deadline is putting pressure on small businesses. Compliance comes with a price tag. Alternative finance can help these firms afford the resources that they need to switch to the digital system and comply with the new rules.
As of April this year, all VAT-registered companies will have to submit their VAT return digitally using an approved app. This means a change in systems for almost 2.7 million businesses. According to a new survey by Mazuma Accountants, many small businesses are struggling to prepare properly for this move. Of the business owners questioned, over half admitted to having little knowledge of Making Tax Digital and a similar amount to being worried about how the changes will affect their companies.
While the change to a digital system is a logical step in our increasingly digital world, it is not without its challenges for small businesses, not least in terms of finding the resources needed to ensure compliance with the new rules. Compliance requires the investment of time and money, at a time when small businesses are already under significant pressure.
Business owners will either have to spend time familiarising themselves with the new system or the train existing staff or employ someone new for this purpose. Based on the findings of a new survey from accounting software provider Intuit QuickBooks, which found that one in eight self-employed people would rather jump out of a plane than file their tax return, the second scenario might be the more popular.
Whatever choice business owners make, there’s a cost. And it’s not the only one. The financial impact of government policy costs is a bugbear for small business owners – Making Tax Digital is just one in a lengthy list, alongside the likes of pension auto-enrolment and business rates. Indeed, the latest edition of the Impact of Government Policy Index, which is compiled for the Federation of Small Businesses (FSB), shows that small businesses are spending 15% more on taxes, rates, levies and employment obligations compared with 2011. This rise amounts to an average increase of £60,000 in costs per year.
Furthermore, the FSB has published research in the past that shows that small businesses each lost an average of £5,000 and three working weeks per annum to tax administration and paperwork.
So, how can small businesses manage the costs of compliance with the new VAT rules? Alternative finance can help.
In the face of prolonged caution from traditional lenders, the likes of invoice finance, asset finance, peer-to-peer lending and crowdfunding are offering small business owners an alternative means of accessing capital for essential investment, including in the resources required to comply with government business policies.
Small businesses need to have the infrastructure in place to ensure that they comply with the new VAT rules (and with the new income and corporation tax rules that will be introduced in April 2020). This requires investment and as such, owners must be aware of all the funding options available to them, including alternative finance facilities.
To find out more about A&T Business Associates services, contact Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.
