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MTD is costly for small businesses, warns FSB

Putting MTD-compliant software in place this year will cost small businesses £564 on average, the Federation of Small Businesses (FSB) has said.

MTD is costly for small businesses, warns FSB
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The FSB is urging Chancellor Philip Hammond to recommit to light-touch enforcement of MTD as its latest survey shows that half (50 per cent) of small businesses are not currently ready to comply with the scheme, which comes into force in less than three weeks. 

According to FSB's research, more than a quarter (27 per cent) of firms have not started preparing for MTD, and a further 23 per cent have received quotes for software that will make them compliant but are yet to purchase access to any. A tiny proportion (3 per cent) said they have been part of the MTD pilot.    

"We’re only three weeks away from the roll-out of MTD and small businesses are clearly not prepared for it. That being the case, the chancellor must double down on his commitment to light-touch enforcement when he delivers the Spring Statement on Wednesday. Small business owners shouldn’t be punished for honest mistakes, made more likely by a rushed HMRC roll-out," FSB national chairman Mike Cherry said. 

FSB's research revealed that putting MTD-compliant software in place this year would cost small businesses £564 on average. Software fees come in the form of one-off charges or annual subscriptions.

The bigger the business, the higher the cost.

The FSB cautions that those with a turnover between £500,001 and £1 million are set to be hit with a £872 bill for MTD-compliant software on average, while firms with a turnover of more than £1 million will see fees of £1,019.  

"Promises were made that MTD compliance would be affordable. Now many firms are finding themselves on the hook for hundreds of pounds for software," Mr Cherry said.    

"At a time when small business confidence is in the doldrums – and wages, auto-enrolment contributions and business rates are rising – more costs and admin burdens are the last thing they need. They also have the small matter of Brexit to think about."

Moreover, the FSB pointed out that despite government claims that the initiative will “make it easier to report”, only one in 10 (10 per cent) small firms believe MTD will have a positive impact on tax reporting and financial management processes. More than a third (36 per cent) believe it will have a negative effect. 

FSB's new research also highlighted the importance of offline accounting methods to small firms. Around four in 10 (37 per cent) use paper invoices, while close to a third (29 per cent) use paper receipts and bank statements to keep track of their finances.

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