In the Budget announced in 2015, the government announced a plan for the digitalisation of the taxation system, which will make Britain’s taxation system the most digitally advanced all around the globe. This system, Making Tax Digital (MTD), has been received with lukewarm support, mainly because there have been many misconceptions about it. The vote to leave the EU only six months after the announcement for MTD did not help much, either. In this post, we will debunk the most common myths surrounding Making Tax Digital.
Myth # 1: The Digitally Excluded will not be Involved in MTD
It is assumed that people who genuinely cannot use digital tools will be completely exempted from the Making Tax Digital initiative.
The truth is that although certain allowances would be made, like the freedom of nominating another individual to update the information, every taxpayer would be on board the Making Tax Digital scheme.
Myth # 2: Businesses are Reluctant to do Tax Digitally
Another popular myth that is being circulated is that businesses are unwilling to go digital, and are not fond of the scheme.
Businesses are always the first to accept moderniszation and accepting the technology that would make their jobs easier. Millions of firms in the country already manage their taxes over the internet. Talking in numbers:
- 99% of all VAT returns are done online
- 98% of Corporation Tax is done online
- 86% of Self-Assessment returns are done online
Myth # 3: Businesses Would Be Required to do 4 Tax Returns in a Single Year
The term “quarterly returns” has scared many people into thinking that now they would need to file tax returns four times a year, apart from the final, End of Year return.
Businesses would only need to check and update the digital information on their digital accounts on a quarterly basis. The regular updates would ensure that all the information being collected and provided to the HMRC is correct.
Myth # 4: Businesses Would Need to Keep Extra Records with them
The updating of digital accounts has created the misconception that businesses would be required to keep extra records.
However, the reality is that there will be no need at all to keep additional records, and the business burdens would be reduced by £400 million.
Myth # 5: Digitalisation of Tax would be Erroneous
People believe that the digitalisation of the tax system would be a complex system which would hinder compliance and increase errors.
Not at all true! When Making Tax Digital will be fully implemented by 2020, people can safely enjoy the benefits of a streamlined approach to the taxation system, and errors would be reduced. The regular updates of the documents would ensure that the HMRC receives the correct information and is able to improve the quality of the record keeping. As a result, there will be fewer businesses that will face the bolt from the blue of having to pay a higher tax bill that they had anticipated. The HMRC is devoted to make the taxation process simpler, easier, and error-free. Taking into account that £6.5 billion is lost on an annual basis due to errors, this step is surely commendable.
Myth # 6: Brexit would Cause Damage to the MTD Scheme
It is believed that the vote to leave the EU would create many problems in the implementation of MTD.
As far as we have observed, the only effect of Brexit on MTD seems to be possible delays in the implementation of the project.
The myths surrounding Making Tax Digital need to be debunked so that the right information can filter through. We are working closely with the HMRC so that you can receive the right information, and when it is implemented, are provided with the right tools.