Online tax system baffles some contractors

Monday 21 October 2013

As the government seeks to transfer more of its administrative services online and do away with paper when possible, it seems that these moves to improve efficiency and cut costs are not to the advantage of all the UK’s smallest businesses. In fact, new research from the Association of Accounting Technicians (AAT) shows that many contractors, self-employed professionals and micro-businesses are still using paper-based filing methods where they can.

The survey of 1,000 businesses, including self-employed workers and firms with fewer than ten employees, found that more than two out of three felt the tax system was becoming more focused on digital channels. But it seems as though this development is not welcome among all firms - one in ten respondents filed a Self Assessment tax return on paper, despite facing an earlier deadline than those submitting records electronically.

Interestingly, more than 70 per cent of this paper-filing group said they were actually capable of submitting information digitally, but simply preferred to send in a hard copy, indicating that HMRC’s efforts to move towards a paperless tax system may continue to face plenty of resistance in the future.

For others, just having the time and knowledge to keep up with their digital online obligations is a serious obstacle. Nearly four out of ten said they had neither the resources nor the expertise to keep up with changes to the governmental filing system to the point where they felt excluded, while another fifth said that it is now too complicated to complete a tax return and that the system should be simplified.

When it comes to seeking help and advice, nearly half of respondents said they tended to go to the HMRC website for tips and guidance. Even so, it seems that contractors and micro-businesses are not using all the existing tools available to them - six out of ten said that they had never used or considered using technical aids, such as free downloads and basic accounting software.

Respondents clearly felt that tax administration disproportionately affects smaller companies: 21 per cent said larger firms were at an advantage because they had the resources to hire specialist support. For the 29 per cent who had begun using third party support such as accountants to handle their tax affairs, it appears that meeting their obligations comes at a cost they are struggling to meet.

“It’s clear that conducting one’s tax affairs online is a time consuming and daunting process for some and this has caused many micro businesses to either stick to old methods that they are more comfortable with or seek third party support,” says Adam Harper, director of professional development at AAT.

“While reporting digitally and in real time will be hugely beneficial in the long-term; we do have to cater to the fact that not all small business owners are digitally as engaged as others.

“No business should feel digitally excluded and more needs to be done to engage those most at risk of being left behind.”

AAT adds that extra pressure has been placed on small businesses by practices such as real-time information reporting for payroll data. However, companies of all sizes will have to be brought up to speed on digital administration and if important government initiatives such as Universal Credit are to go ahead as planned.

By Victoria McDonnell

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