SMEs at risk of digital exclusion, finds ICAEW

Smaller businesses could be excluded from government plans for making business transactions digital, found new research by the ICAEW.

Ahead of the consultation deadline for ‘Making Tax Digital’, the ICAEW has compared the success and failure of global attempts to digitalise tax in the report ‘Digitalisation of Tax, International Perspectives’.

David Lyford-Smith, ICAEW technical manager, said: “There must be an avenue for those who cannot comply with digital reporting to avoid penalties; this may be through traditional paper-based record keeping or via supporting a network of accessible and affordable tax agents.”

The ‘”largest and most persistent” issue is digital exclusion, which is common among smaller businesses. The government may work to educate and provide resources but “total compliance is impossible”, the report stated.

In other countries digitalisation of tax has been introduced, “we should look at examples to see universal impact” added Lyford-Smith. “Estonia’s digital transformation is one of the leading examples and yet there is digital exclusion as in remote areas internet connectivity is poor.”

The results of an ICAEW survey earlier this year showed that only 25% of UK businesses maintain electronic accounting records, “So there is a huge amount to be done by businesses, HMRC and the software industry in a very little time” said Lyford-Smith.

“We believe the move to digital should not be made compulsory and instead should be a matter of choice for business owners.”