HALF of VAT-registered small firms will not be ready for a new digital tax regime when it comes in on April 1.

That's according to a survey published by the Federation for Small Businesses which polled 746 businesses about the Making Tax Digital roll-out that comes into force next month.

The new rules mean firms will have to use MTD-compliant software to submit VAT returns, doing away with paper tax return forms.

Yet 27 per cent of firms surveyed say they have not prepared for MTD, and half, exactly 50 per cent, don't have the right software in place, with less than three weeks to go.

Richard Matthews, from Swindon-based Optimum professional Services, which has been running regular workshops to educate firms about the changes, told the Adver: "It's a whole game changer really, and once they have got it up and running within a few years businesses might find they are paying their taxes every three months."

Firms will have to pay for the new software, helping the taxman collect more easily, and shifting costs onto small business owners.

Richard added: "For HMRC it will have a very positive impact, but I think for the majority of people it will be a less than positive experience.

"They will be doing less, so they're cost saving, and that cost is being borne by small businesses.

"HMRC will probably argue their role isn't there to help people, and they haven't got a great record for introducing change. If history repeats itself, they are unlikely to be overly supportive.

"It may be better to outsource the whole booking keeping role and use that time to focus on their businesses, like our clients," he said.

Mike Cherry, FSB national chairman, called for a halt of the plans, saying: “We’re only three weeks away from the roll-out of MTD and small businesses are clearly not prepared for it," he said.

"Promises were made that MTD compliance would be affordable. Now many firms are finding themselves on the hook for hundreds of pounds for software

"Small business owners shouldn’t be punished for honest mistakes, made more likely by a rushed HMRC roll-out.