Research published by the Federation of Small Businesses (FSB) has found that putting Making Tax Digital (MTD) software into place 'could cost UK small firms an average of £564'.
MTD for VAT is set to come into effect from 1 April 2019 for businesses which have a taxable turnover above the VAT registration threshold (currently £85,000). As part of the initiative, businesses must keep some records digitally, using 'functional compatible software'. This means a 'software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API)'.
The FSB revealed that 23% of small businesses have received quotes for MTD-compliant software, but are yet to make a purchase.
According to the research, bigger businesses must pay higher prices for MTD-compliant software. Firms with a turnover between £500,001 and £1 million could be landed with an average bill of £872 for MTD software. Businesses with a turnover of more than £1 million could be given a bill of £1,019.
'We're only three weeks away from the roll-out of MTD, and small businesses are clearly not prepared for it,' said Mike Cherry, National Chairman of the FSB.
'That being the case, the Chancellor must double down on his commitment to light-touch enforcement when he delivers the Spring Statement on Wednesday.
'At a time when small business confidence is in the doldrums – and wages, auto-enrolment contributions and business rates are rising – more costs and admin burdens are the last thing they need.'