Tax reform in the U.K. will aim to help small and medium-sized enterprises ditch the paper when it comes to their accounting, according to the latest reports.
Government authorities are set to publish proposals that would require SMEs to submit quarterly tax returns online, reports said Tuesday (Jan. 3). It's an initiative, dubbed Making Tax Digital, the U.K. aims to sort out this year to ensure that all taxes are filed online by the end of the decade and will require taxes to be filed quarterly — not yearly — via software approved by HM Revenue & Customs (HMRC).
Reports said SMEs will be particularly impacted by the changes as business owners will no longer be able to simply handle tax issues at the end of the year. It will also force many companies to ditch the paper and begin using digital and cloud-based accounting solutions, reports added.
Officials will aim to begin introducing the new mandates in April 2018, first with large businesses. “This leaves SMEs with just one year to make changes to the way of accounting,” reported SmallBusiness.co.uk. “Throughout 2017, they will need to look at how they can transition from paper-based record keeping to the mandated digital system by 2018 or risk facing fines from HMRC.”
According to reports, government officials expect “widespread resistance” in response to the tax reform. SMEs may be especially reluctant to adopt digital accounting and bookkeeping solutions.
But recent research suggests the changes may be good for SME health in the U.K. Funding Options reported in 2015 that HMRC moved to shutter thousands of SMEs in 2014 because they failed to pay their taxes. An ability to properly manage cash flow can be detrimental come tax time, the company said, and proper record keeping may help a business be able to determine whether it will need external financing to cover tax costs.