HMRC is set to digitalise the taxation system in the country by the year 2020. This will be applicable for landlords, entrepreneurs and most businesses, and they would require digital tools (applications or software) to keep their accounts updated. According to the timeline published in the MTD Roadmap, the businesses will be required to make regular updates for NIC and income tax from April 2018. In addition to this, they would also need to report quarterly through their digital account. But with the vote of leaving the UN shaking up the nation, people have been wondering how it would impact the implementation of MTD.
Why Make Tax Digital?
HMRC has pointed out some flaws in the current taxation system, and posed the digital taxation as the solution. Basically, after the implementation of MTD, the taxation would become easier, there will be transparency, and fewer inaccuracies will be recorded, making the system more efficient than ever before. This change will be the greatest digital change in the world, and first of its kind.
The current trends and their projection in the near future outline the need for Making Tax Digital. For instance:
- By the year 2020, about 75% of the country’s workforce will be Millennials. And this is the generation born into the digital world, which is most comfortable with the use of technology. The digitalisation of the taxation system will cater to their needs.
- Digital presence has taken over, and is proven to be one of the best ways to attract customers.In accountancy, too, a digital presence would mean that the cost of switching would be low, and the prices can be kept competitive
MTD and Brexit
For the business firms and accountants wondering how Brexit has an impact on the implementation of MTD, we can safely say that there may be some delays, but the project will not be scrapped. So be ready for the change!
Benefits of MTD
HMRC has provided the four pillars of MTD, namely, tax made simple, tax in one place, MTD for individual taxpayers, and MTD for businesses. Let us discuss them individually.
1. Tax Made Simple
Currently, taxpayers need to first receive the information from third parties like employers, building societies, banks or other government departments, and then provide the data to HMRC. But with the implementation of MTD, HMRC can directly receive the information from the third parties and as a result, speed up the taxation process, making it simpler and easier.
2. Tax In One Place
Online records are easy to manage, and keeping that into account, HMRC has taken the step of creating a single platform where the taxpayers can view the summary of their entitlements and liabilities and access it anytime.
3. MTD for Businesses
It seems inefficient for a business to know only at the end of the year how much tax they need to pay. Therefore, in MTD, the frequency of the annual update about a business’ main or secondary source of income has been changed to quarterly updates, so that HMRC can receive ‘real time’ data and streamline the taxation process.
4. MTD for Individual Taxpayers
Every individual taxpayer would be provided with a digital account, and they would have the opportunity to digitally connect with HMRC whenever they want. The account would hold the information about their tax affairs. Support would be provided through secure messaging and web chat.
How Can We Help?
Capium aims to equip businesses and accountants with the tools they need to streamline their processes. With the upcoming changes in the implementation of MTD, you would require the best services to help you get ahead of the game.