Xero urges UK gov to introduce digital tax relief for SMBs

The cloud accounting software provider found that resilience and recovery of SMBs is significantly influenced by their digital skills

Xero has urged the UK government to step in and encourage SMBs to use digital tools to their fullest potential in a bid to help the economy recover from the impact of the COVID-19 pandemic.

According to a new report from the cloud-based accounting software provider, smaller businesses have been more dramatically impacted by the current financial crisis than larger enterprises, with job losses estimated to be almost twice as big. 

By analysing 300,000 customers’ anonymised and aggregated data, Xero found that resilience and recovery of SMBs is significantly influenced by their digital skills.

SMBs that used business management apps before the financial crisis had 12% smaller revenue declines as well as 12% fewer job losses. Moreover, businesses with at least five apps connected to their account suffered from losses a third smaller than other SMBs during the crisis, and had 40% less job losses.

The findings from the report have resulted in Xero calling on the UK government to encourage small businesses to use digital tools to their fullest advantage. The company’s policy recommendations include a digital tools tax relief, improved regional internet access, as well as an offset of technology expenses against tax in order to aid small businesses in digitising and building resilience for future economic challenges.

Managing director of Xero, Gary Turner, described the economic recovery as “at a crossroads now as furlough and eating out schemes come to an end”. 

“As unpredictable as this year has been, one certainty is that digitally-enabled businesses are likely to recover faster than those who aren’t,” he said.

“We’re calling on the Government to support business recovery with funding for tech adoption and the introduction of a tax offset for expenses against technology implementation. Driving digitisation will help countless small businesses to get back on their feet.”

The message to the government comes as Xero announces changes to its Starter Plan, aiming to facilitate cash flow management and growth for SMBs during the pandemic.

Xero users can now send up to 20 invoices a month and make as many bank reconciliations as they need. The company has also announced the launch of a new Xero Projects' profitability dashboard, aiming to simplify the overview and management of projects and their profitability by showing total profit margin, all work invoiced, and costs. 

Xero’s chief product officer Anna Curzon said that the company wants “to help these new businesses that are starting off now to be set up for a digital environment right from the start by lowering the barriers of entry”.

“We also know that with COVID-19, being paid on time and controlling cash flow has become more important than ever,” she added. “We want to do all we can to ensure businesses stay strong by providing deeper cash flow insights and creating seamless experiences to help them get paid faster.”

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