Nobody likes doing their taxes. The seemingly endless paperwork, the stress of not knowing how much you’re going to have to pay, the rootling around through that shoebox of receipts that seems to pile up throughout the year to find that one receipt that you need to expense … the whole thing is generally acknowledged to be a pain.
And yet, when faced with Making Tax Digital (MTD), an alternative that would streamline the process, give you a clear idea of exactly how much you’re going to need to set aside for taxes, and make the dreaded shoebox-that-eats-receipts a thing of the past, many small business owners in the UK are really resistant.
Why are so many small business owners resisting MTD?
Part of the reason seems to simply be the amount of confusion surrounding the issue. MTD has been in the works for about two years now, and there’s still no definite idea of when it’s going to roll out, especially since the recent announcement. While HMRC has said that they are committed to reforming tax by 2020, with MTD possibly rolling out as early as 2019, it’s still unclear what the timeline of the rollout will be, or whether it will be affected by the many other issues on the current political landscape.
Then of course there are the rumours. Perhaps fuelled by the confusion surrounding the issue, small business owners are surrounded with posts and reports perpetuating misunderstandings about everything from the timing of tax payments to how many tax returns they’ll need to file per year. Many of the rumours circulating in the small business community make MTD seem like it’s going to be incredibly onerous and difficult to participate in, which is unlikely to be the case. While the details of the rollout and some aspects of MTD are still being hammered out, the general structure and plan seem to be solidly in the corner of small business owners.
And then of course there’s the fact that the majority of UK SMEs are likely unprepared for MTD, and will have to make changes before they’re able to participate, albeit relatively minor ones in almost every case.
But one major reason is because that’s just how new technology is received.
Geoffrey A. Moore discusses this very issue in his classic work Crossing the Chasm, which is considered to be a cornerstone text in the technology development field. According to Moore, new technology tends to be received by people according to a bell curve.
At the far left end of the bell, you have the Innovators, who are willing to try anything as long as it’s new and exciting, followed by the Early Adopters, that small group who tends to be more receptive to new technology in general and is willing to get on board with the new programme or device nearly as soon as it comes out.
Next, you have the Early Majority. This is the bigger group of people who are willing to try out a new programme or device if they can clearly see the lasting benefit it will have for their business.
After that, you have the Late Majority, who joins in when they see it working for everyone else, and then the Laggards, who finally adopt after everyone else has.
Between each of these four stages there’s a gap — but the biggest gap lies between the Early Adopters and the Early Majority. That’s because it typically takes quite a lot of time or effort to get new technology past the early adoption stage. In fact, most technology never makes it out of that stage.
We’re currently at the beginning of this bell curve with MTD.
MTD is going to come out sooner or later, and we’re just starting at the beginning of this bell curve. While some people are already primed to be Early Adopters, we suspect most small business owners will either be in the Early Majority or Late Majority. Currently, that big gap between Early Adopters and the Early Majority is showing up as resistant to MTD in general.
Since most of the changes that will be required for businesses to remain in compliance with MTD are simply good business finance practices — and since MTD is going to happen whether the small business community likes it or not — we’d encourage you to think about moving into the Early Adopter category, if you’re not already there.
We know that changes in accounting and business finance can be one of the last things you want to think about though, so that’s why we’re here to help!
You can keep up to date with the latest on MTD right here, or find out how to get your business MTD-ready here. It’s easier than you think, and you’ll be so glad you’ve got it done already when MTD finally does roll out.