- 4th March 2019
- Posted by: Edward Kirkby
- Category: Business
Making Tax Digital (MTD), the HMRC initiative to digitise tax is set to roll out in April 2019. The aim is to make administration more efficient, effective and easier for tax payers. Findings by The Productivity Payout: UK Small Businesses and the Digital Economy by Volterra Partners have projected annual net gains of £6.9bn in both turnover and growth for the UK economy. With this reaching £46bn over a five-year period.
These projections are based on the additions to productivity that the technology required to become MTD compliant will catalyse (we recommend Xero or Quickbooks) . Main improvements include enhancements to cash flow and human resources management, with the knock-on effects for companies of all sizes set to be substantial and a large proportion of the increase derived from saved time. The report predicts; sole traders will experience an average net gain in annual revenue of £1,900 whilst small companies (10-49 employees) will see average increases in their top line of growth of £19,000.
If the MTD initiative surpasses just VAT-registered businesses, which is currently the only initiative actioned by the government, this will stimulate additional productivity and further increase the ‘digital snowball’. It’s predicted if this does occur the total productivity payout could reach £57bn over the next five years.
These expected results show businesses should look to capitalise on the efficiency of MTD. MTD presents a huge opportunity to streamline operations whilst also simplifying tax. This includes businesses with turnover below the VAT threshold who can also voluntarily opt in to MTD. We highly recommend this as an efficient way to keep track of your business’s finances.
What’s frightening is the imminent introduction of MTD yet the large number of businesses still unaware of how impending it is. It has been reported that roughly one in five SME’s are still unaware of MTD and the positive associated productivity payout. The largest productivity growth impacts are set to be felt by wholesale and retail trade, construction, professional and manufacturing sectors.