Apps are absent at two-thirds of taxpaying traders

Two-thirds of tiny trading companies lack the central plank of the taxman’s reform to how they must settle up with him from 2018 -- software.

In fact, 65% of small businesses do not currently use any sort of application to manage their accounts, found UK200Group.

The tax and legal body warns that the majority of such owner-managed enterprises will therefore be “forced to adapt significantly” if they are to comply with Making Tax Digital (MTD).

It adds that the “greatest shock” will be for the 16% of traders it polled who admitted to using the ‘shoebox method’ when it comes to keeping their books.

As the name implies, these owners simply stash away their receipts and personally “do nothing” to record their transactions, UK200Group said. They simply hand over the bills to an accountant.

“The ‘shoebox method’ users will have to learn how to keep records, invest in software and then spend time inputting the data they collect into the software,” said the group’s chair Richard McNeilly.

“MTD represents the single most significant change to the UK’s system of taxation in recent times, and many of our smaller business clients are simply not ready for it.”

However, some are more ready than others. More than a third already use some form of software for their accounts, so the "transition should not be too expensive or time-consuming" for these software-savvy traders, Mr McNeilly said.

A further 27% used "computers" for their book-keeping, but all of these enterprises will still need to change their systems and convert to MTD's yet-to-be unveiled software, aside from the requirement to file online "at least" quarterly.