Lawyer Monthly Magazine - March 2019 Edition

14 Monthly Round-Up www. lawyer-monthly .com MAR 2019 • HMRC’s Making Tax Digital (MTD) has power to catalyse first £6.9bn annu- al benefit, or £46bn over five years • If all SMEs in Pro- fessional Services were catalysed by MTD, the sector would see a £1.1bn annual benefit • MTD creates ‘digital snowball’ for SMEs by driving so-called spill-over productivity benefits • New model shows roadmap beyond MTD to £57bn over five years A new research report published has laid out a digital roadmap that could catalyse up to a £57bn productivity payout for UK SMEs over five years. Making Tax Digital, the digitisation of VAT in April 2019 will immediately cat- alyse an annual benefit of £6.9bn, or £46bn over five years in net gains in turno- ver and growth for the UK economy. If all SMEs in Professional Services were catalysed by MTD, the sector would see an an- nual benefit of £1.1bn. These are the major find- ings of The Productivity Payout: UK Small Business- es and the Digital Econ- omy - a new research report and first of its kind economic model re- leased today by Volterra Partners the renowned independent economic consultancy in association with Intuit QuickBooks, the world’s leading account- ing software provider. This new economic mod- el – built on predicted behaviours of small busi- ness owners as a result of social and financial driv- ers – demonstrates that once businesses integrate technology to become MTD compliant, a ‘digital snowball’ effect is likely to occur as they experi- ence so-called spill-over benefits. These spill-over ben- efits will drive increases in SMEs’ levels of productiv- ity, for example by better enabling better cash flow and human resources management, and free- ing time for more pro- ductive activities such as sales, marketing or train- ing. Having adopted one form of digital technology, businesses tend to adopt others, in turn saving more time and reaping the re- wards from cumulative productivity benefits from digital interoperability. Despite the huge gains to be made from the adop- tion of digitisation of tradi- tional business practices, one in seven SMEs in Pro- fessional Services are still unaware of MTD and its associated impact[1]. The impact for each type of small business in the UK is stark, with MTD deliver- ing a spill-over productivity payout regardless of size. For sole traders, the pre- dicted net gain in annual revenue is £1,900, whilst a traditional small business with 10-49 employees will see an average increase of £18,000 to their top line growth. The average gain for businesses in Profes- sional Services is £2,300/ year. With no further rollout of MTD beyond VAT-regis- tered business, and no other action by govern- ment or industry, the mod- el predicts SMEs across the UK will see a total produc- tivity gain of £46bn over the next five years. If indus- try, government and SMEs themselves work together to catalyse further growth of the ‘digital snowball’, the total productivity pay- out is predicted to be sig- nificantly higher at £57bn over the next five years. The roadmap to deliver- ing the £57bn includes: • The continued rollout of MTD beyond the first wave as currently proposed but not finalised • Integration of Open New research report lays out digital roadmap to £57bn productivity payout for UK small businesses BUSINESS Banking into Financial Management Software • SMEs collaborating with the software industry on training and support Andrew Chamberlain, Deputy Director of Policy and External Affairs at the Association of Independ- ent Professionals and Self Employed said: “This re- port sets out a clear and positive view on the ben- efits that digitisation can bring, not just to self-em- ployed businesses, but to the economy as a whole. But there are challenges too. The roll-out of Making Tax Digital must be care- fully handled to ensure businesses can transition to digital systems over a sensible time frame and with considerable support from both government and industry.” Michelle Kennedy, Co- founder & CEO @peanut_ app said: “Digital tools are absolutely essential to any business looking to grow and succeed in such turbulent times. Busi- nesses who fail to adopt digital-first thinking risk los- ing the agility other busi- nesses gain when they are more open to using digi- tal behaviours. Without a progressive tech mindset, companies across the spectrum of industry may significantly hamper their prospects of long-term growth.” Predicted increase in annual turnover (£) if all SMEs experience a catalyst to adopt all digital processes within financial management software Source: Volterra Partners Unregistered businesses are not registered with HMRC for VAT or PAYE. Sole traders are registered for VAT but not PAYE.