Pinch pointsResearch carried out by Xero at the end of 2015 found that 65 per cent of British small business blamed financial issues, such as cash flow visibility and access to capital, as a reason for failure. Xero and Turner see the new digital tax accounts agenda being pursued by the government as a major part in making micro and small businesses more aware of what the current financial situation is. For those that fear the new digital tax accounts transition period is a disaster waiting to happen, Turner pointed to what has been achieved with Real Time Information (RTI) and PAYE. Having first been announced in 2002, RTI took ten years to finish but is now firmly imbedded in business practice. Part of how the government and HMRC plan to come good on the ambitious five-year full roll out plan involves the range of open application program interfaces (APIs) set to be built. Businesses and software companies will then be able to use these APIs to help bring about efficiencies. we have many thousands of customers using the web API in Xero to do useful things. In that sense, the government web API initiative is great as that is how you do things today. The government is looking to businesses like Xero to help in the process, de-risking it, rather than HRMC having to do it all, Turner explained. there is still a need to stay sober about this though, it’s a huge endeavour. With lots of people needing to transition from old records to digital tax accounts, it relies on HMRC getting it right. But what are the alternatives? We can’t wait, there is a need to do this at some point. Business owners still worried about how they can comply should have part of their apprehension lessened by the role companies like Xero believe must beplayed. Whereas previously Xero would be expected to only build software, its job now goes beyond that and into education. we have invested in training and online tutorials it’s nothing about what we do but does educate our customers. At its annual Xerocon conference in February, Xero will be welcoming individuals including Charles Counsell, executive director of automatic enrolment at The Pensions Regulator, and Brigid McBride, API and third party software lead at HMRC. Discussions will then centre on how small and growing businesses can make sure compliance is met in the auto-enrolment and digital tax accounts arenas.
Going forwardThe roadmap to full digital adoption is two-stepped. By early 2016, the more than five million small businesses that populate the UK, and first ten million individuals, will have access to a secure, personalised tax account. By 2020, more than 50m individuals and small businesses will have the same removing the need to complete a tax return. However, there have already been worries expressed about the digital tax accounts system. The Federation of Small Businesses has submitted to the Office of Tax Simplification, ahead of the March 2016 Budget announcement, so that there would not be a need for separate assessments for business rates, corporation tax, value added tax and national insurance contributions. There is no doubt the process will be rocky, as most government digital initiatives tend to be, and partial to constant tinkering. However, what is reassuring is that big businesses such as Xero seem to be bought into the process. There is a logical commercial reason for this kind of company to be interested in the successful implementation of a digital tax accounts system, but Xero’s technology, expertise and presence in the market will be key.
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