Making Tax Digital – quicker, easier and more convenient… sure about that?
The UK government is trying to convince the business that introducing new way of submitting tax returns, electronically and quarterly will make the system easier, quicker and will reduce unnecessary formalities. However, very few talk about the fact that this will increase the cost of submissions, after all there will be need to do this four times more often than before. To mitigate those costs one could buy specialist accountancy software or use services of accountancy business.
Great Britain is for many years is classed as one of the most business friendly countries in the world. The regulations governing companies is much friendlier than in many other countries, tax system is more favourable and the bureaucracy is easier to handle, it results in thousands of foreign opening they own companies every year. On the other hand, the compliance with tax requirements can pose challenge at times, especially when government introduces changes.
Making Tax Digital
The Government introduced a new system for tax self-assessment available to all tax payers regardless if they are self-employed or corporate businesses. It allows everybody to log in to their online tax portal and submit all records there. Using the HM Revenue & Customs (HMRC) website tax payer can amend and change details, submit returns or interreact at the basic level with the tax man for other purposes.
Taxes in UK – benefits of going online
The aim of the changes and introduction of online systems is to increase the efficiency of the administration, reduction of unnecessary bureaucracy and helping companies to comply and interact with the tax office, in the long term this can bring savings too. The data is submitted to the HMRC’s system as a Real Time Information and allows tax payers to access all information at any given time in one virtual space.
One of the key changes introduced by the government is forcing the business to submit they tax informaiton quarterly and not, as it was until now, once a year. The authorities argue that this will simply tax process, information will be submitted more regularly and as a result the individual accounts held in the HMRC will be more up-to-date when it comes to overpayment or underpayment of the tax. The new quarterly returns would cover all companies, self-employed and landlords.
New responsibilities already in 2018
In the first instance it will be the sole – traders and landlords that have a turnover above VAT registration threshold (currently £85 000) that will have to comply with the new tax submissions requirements. The new regime will be introduced for them as from April 2018 (VAT registration threshold is likely to rise for an another few thousand pound by then). Others, with a threshold below that limit will be asked to do so from April 2019. April 2020 is the Making Tax Digital live date for Limited Companies.
The government plan assumes that by 2020 all tax payers will find themselves under the new regulation.
Software yes but not for everybody
Taxes in UK, although much simpler than in other countries, would most likely require involvement of professional accountants. Very effective alternative under the new tax regulation would be licensing and use of a dedicated specialist software. However, it is important to note that becoming competent in use of such computer system can be time consuming and problematic. Even once the basic functions are learned still it does not guarantee that the returns will be error free, creating a danger of costly fines.
Response to the new tax legislation
Although the UK Government advocates that the Making Tax Digital and the quarterly submissions will be huge benefit, other stakeholders to not agree with such optimistic view. As much as online submissions will be advantageous, doing so four times a year does not have to be as it adds more responsibility and costs. Time will show how tax payers will deal with the changes introduced by the British Government, for many using professional accountancy service will be only viable solution.
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