FROM April 1, the Government’s Making Tax Digital (MTD) regulations come into force. They will apply to all Value Added Tax (VAT)-registered businesses.

However, research from the Federation of Small Businesses shows that currently, half of VAT-registered small firms do not have right software in place. More than a quarter (27 per cent) have so far made no preparations for MTD.

The research also shows that, on average, it will cost business owners £564 to put compliant software in place. So, while promises were made that MTD preparations would be affordable, in reality many firms now find themselves having to pay out hundreds of pounds for new software.

There have also been many Government assurances that the initiative will “make it easier to report”.

Yet our research shows that only one in 10 small firms believe MTD will have a positive impact on their tax reporting and financial management processes. More than a third believe it will have a negative effect.

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With little more than two weeks before the roll-out of MTD, it is clear that many small businesses are not prepared for it.

They are finding it far more difficult, time-consuming and expensive to become compliant than was predicted by HMRC. In part, this is due to the cumbersome registration process.

In addition, HMRC’s own research indicates that one in five firms that will be forced to comply with MTD on April 1 have no knowledge of it.

Given these issues, FSB is calling for a full review of the MTD rollout process and for a ‘light-touch’ approach to enforcement.

We are also seeking a guarantee that it won’t be forced on those below the VAT threshold until at least the end of this Parliament, in 2022.

At a time when confidence is flagging and when wages, auto-enrolment contributions and business rates are rising – more costs and admin burdens are the last thing small businesses need. Especially as they may be facing additional challenges arising from the passing of the Brexit deadline, just three days earlier.