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Digital Tax

Making Tax Digital 

The Issue

FSB recognises the significant potential Making Tax Digital has for some small businesses – particularly around digital tax accounts. However, since it was announced in 2015, we have actively engaged with HMRC to communicate our key concerns around the proposals, including on mandatory quarterly tax reporting.

We are still concerned that the cost of upgrading to the mandated level of software, for those small businesses above the VAT threshold  will cost businesses too much – detracting from vital business funds.

Government needs to ensure the software is low cost and beneficial to businesses

Action FSB has taken

  • In November 2016 FSB published independent research assessing the potential impact of Making Tax Digital on small businesses. It recommended implementation begin with larger businesses and be pushed back. The analysis called for the smallest firms to be exempted from the proposals altogether. 
  • In Budget 2017 FSB gained a significant policy win when the Government agreed to delay the launch of Making Tax Digital for small firms with a turnover of less than £85,000. This means that in addition to the 1.6 million small businesses and landlords that were already excluded from Making Tax Digital, a further 1.3 million small firms and landlords will now no longer be in scope.
  •  FSB secured further concessions from HM Treasury which included a longer lead-in time for some businesses to join Making Tax Digital as well as the offer of direct financial assistance for some small firms.
  • FSB conducted research, “Taxing Times” that highlighted where small businesses found the tax system most inefficient and the fact they were spending, on average, over £6,000 on tax compliance.
  • FSB has also secured provision for FSB members to participate in the user-testing of HMRC’s proposed digital systems and will be circulating a concession letter from Government shortly along with a request for participants.
  • FSB has been monitoring the quotes that members are receiving and are pressuring software companies to provide low cost options.

Our Goal

  • FSB wants to make sure that MTD becomes a program that helps businesses to conduct their tax affairs more efficiently.
  • We would also like to see digital systems that help businesses leverage their data for other purposes such as identifying poor payment or access credit.
  • FSB wants to ensure, that the business owners that are unable to adopt MTD are not penalised for  this
  • If no affordable options are made available by software companies, government either needs to subsidise software upgrades for businesses or they need to further delay implementation.

Achievements in...


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UK/Westminster

FSB secured concessions from HM Treasury which included a longer lead-in time for some businesses to join Making Tax Digital as well as the offer of direct financial assistance for some small firms. In addition, the Government agreed to remove small firms and the self-employed with modest turnovers from the proposals. This means that in addition to the 1.6 million small businesses and landlords that were already excluded from Making Tax Digital, a further 1.3 million small firms and landlords will now no longer be in scope. This means that half of the UK’s 5.5 million small businesses will not be affected by mandatory quarterly tax reporting.

FSB has also secured provision for FSB members to participate in the user-testing of HMRC’s proposed digital systems and will be circulating a concession letter from Government shortly along with a request for participants.

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