New VAT legislation causing great stress for UK small businesses
closeup of computer keyboard with vat button
According to research from QuickBooks, 300,000 small businesses are not prepared for the new VAT digital tax legislation that will be enforced from April 2022. The change is part of the government’s Making Tax Digital (MTD) strategy – meaning VAT-registered businesses must keep digital records and use software to submit their VAT returns, the change is due to impact over 1.1 million small businesses in the UK.
With the new VAT legislation rapidly approaching for millions of UK small businesses, the stress of VAT returns is having a major negative impact on small business success and wellbeing. VAT-registered businesses have a duty to complete their returns on a quarterly basis throughout the year, small businesses find this especially troublesome, with the majority of small business owners spending four hours a month worrying over their VAT returns and rising to 7 hours for a further 20%.
Many believe that the time which is being wasted worrying about VAT is preventing many small businesses from reaching their full potential and progressing, with the fear of making errors being the biggest concern among them – standing at 44% of small businesses owners worrying about this.
The upcoming Making Tax Digital (MTD) legislation has meant that from April 2022, VAT-registered businesses with a taxable turnover of less than £85,000 must keep digital records and use software to submit their VAT returns in order to avoid penalties, small business leaders seem to be avoiding this, with recent research showing that 41% or leaders are putting this off. Going digital could prevent stress and make it easier for small business leaders in their future VAT returns, SMEs need more help from the government in order to alleviate stress and let small businesses continue to prosper and be given an opportunity to reach their full potential.
Luke Davis, CEO of IWCapital, discusses the outlook of the festive period for small businesses:
“Whilst the new VAT legislation is being introduced to try to make it easier for individuals and businesses to get their tax right, small businesses are finding it difficult to prepare for it. Getting VAT returns correct is a major worry for any small business owner and most of the time it can limit their businesses performance.
“Small businesses need more help from the government to ease the transition into the new VAT legislation. It is clear that SME leaders all around the country are worrying over the new legislation and wondering how it will affect their business and the government are not providing them with enough support. SMEs are becoming so inventive and versatile with their companies and making sure they are at the forefront of the UK business scene and have become a pivotal part in contributing to the UK economy, but the government must provide them with more help. SMEs are an indispensable part of the UK economy, and the government must help them in any way possible and allow them the chance to continue their growth and progress.”
