Shocking research conducted by Accounting Firm Mazuma shows that 83% of Plumbers are not ready for the changes to tax filing that will become mandatory from April 2023.
Making Tax Digital (MTD) is the biggest overhaul of the tax filing regime in generations.
From 2023 any business, sole trader, or landlord with an income of over £10,000 will have to file under the Making Tax Digital rules. The newest group affected by the rollout of MTD are the self-employed and landlords. Businesses that file VAT returns are already operating under the MTD rules, but those that are not will be in for quite an upheaval when the new rules come into force. Those rules require affected businesses to do the following:
- File returns HMRC 5 times per year (instead of just once as they do currently)
- Undertake digital record keeping
A Ticking Time Bomb
“We have been looking on in dread as we have seen the deadline for MTD creeping up on micro-businesses, with frankly inadequate communication from HMRC about the impact that this huge change will have on them.” says Lucy Cohen, Co-Founder of Mazuma.
“We wanted to understand the extent of the problem that is looming, so we decided to look into what we see as being potentially one of the worst affected groups – construction. So we took plumbers as a sample group and undertook some research.”
In a survey of 200 plumbers in the UK, Mazuma discovered that:
- 83% of plumbers do not use any software or apps to keep track of their sales income and costs
- 46% of plumbers do their tax returns themselves
- 20% of plumbers have a friend or family member complete their tax returns on their behalf
- 41% were not aware of Making Tax Digital by HMRC
It is estimated that there are 120,000 – 150,000 plumbing and heating engineers registered in the UK, a large percentage of which will be self-employed.
“If you extrapolate our figures, that means that we could be looking at over 124,000 plumbers who are currently falling foul of the new legislation from HMRC.” says Cohen.
“And that’s just in plumbing. It doesn’t bear thinking about if you extend that data across the rest of the construction industry or out into the wider micro business community.”
Poor Communication by HMRC
So why isn’t HMRC telling people about this change?
Well, they are, but not loudly enough.
It seems that HMRC has left much of the communication of this problem to software vendors. And the largest software houses have gladly taken on that role – which, given that it’s those companies that are set to benefit greatly from the introduction of Making Tax Digital, it’s not all that surprising that they’ll happily spend their advertising budgets on it.
“The problem is that a lot of those vendors have software products that just don’t work for micro-businesses” says Cohen.
“What plumber has the time to learn to use a piece of software on top of the long hours they already work? And not only that – but have to pay a significant sum for it as well as take on the extra burden of filing 5 times a year?”
A Non-Digital World
“Making Tax Digital is shoe-horning a digital solution into a non-digital world.” explains Cohen.
“People can and will adapt to the new regulations, but they need more help if they’re to do it before it’s too late and risk being subject to penalties. HMRC need to step up their game and really help these businesses, who let’s face it, are the lifeblood of the economy in the UK.”
Get Ready Now
Cohen’s final advice is to start getting ready now, so that you’ve got time to adapt before you have to.
“Find a solution that works for you now. Keep it something simple that meets the requirements of the new rules but fits into the way you work easily.” she advises.