Aveneu Park, Starling, Australia

https://www.icaew.com/en/technical/tax/making-tax-digital/mtd-for-businesses be delayed and can cause confusion and

https://www.icaew.com/en/technical/tax/making-tax-digital/mtd-for-businesses

https://publications.parliament.uk/pa/cm201617/cmselect/cmtreasy/927/927.pdf

https://focusaccountancy.co.uk/wp-content/uploads/2016/08/making-tax-digital-for-micro-businesses.pdf

https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital

Elements of MTD:

References:

 

 

 

A major concern is
the risk of businesses’ systems being hacked and broken into. Charted Institute of Taxation pointed out: “The
potential for hacking and cyber-attacks will increase and should not be ignored
if government is effectively forcing businesses to place confidential
information online. Guidance on protecting businesses and individuals needs to
be available.” This is a major concern because if everything is digital based
now, then there will be no backups with hard copies which is very stressful for
businesses. Hackers can take all confidential information of businesses and
expose them to the public or even change information or delete the data.

Costly- the
software can potentially work out to be more costly to run than an accountant,
depending on the software used. Some softwares are suggested which are free
however the better softwares are the ones businesses will need to pay for,
which won’t really encourage businesses to go forward with this. Furthermore
there will be implementation costs, setting up and installing can take up time
and money paying somebody or paying money to train somebody up to use the
system.

Prompts and Nudges
can also be a potential concern for businesses because people may not
understand how to use the nudges and red flags effectively. They may just panic
and delete everything they have already uploaded and make more mistakes.

Key concerns expressed by businesses on the detail of how MTD
would work

 

Prompts and Nudges-
with the MTD system, when something goes wrong during the process of entering
tax records into the system the business will receive a prompt or nudge
explaining something hasn’t been filled out properly or there is a mistake. It
will incorporate a range of nudges such as pop-ups which flag to the software
user any areas where there has been some inconsistency or any mistakes being
made. This is very helpful for a business because right away they will be able
to fix the issue and after have no stress of what could come up later on.

Another benefit for
a business will be that instead of giving all files to an accountant, the
business owner can run the tax records online themselves. They potentially will
gain more control of what is going on in the business and can potentially save
costs by doing so. Sometimes accountants can make mistakes on the business’
behalf which is very worrying for the business but with the new system it will
enable the owner of the business to know exactly what is going on.

A huge benefit of
the MTD system for businesses is helping the business save time and save
hassle, usually the business would have to bring up issues with their
accountant and many times this can be delayed and can cause confusion and
mistakes. With the MTD system, it allows the business owner to access their
information online without the use of an accountant which will all be up to
date and in real time. Having said that, not all businesses will be able to
fully function a system like this so the help of their accountant will be
better for them but nonetheless will still save a lot of hassle.

The potential benefits MTD offers that could motivate businesses
to engage with MTD

 

Better use of
information- Digital tax accounts will mean that businesses/customers will be
able to see the information that HMRC holds and they will be able to check at
all times whenever they are unsure of how much they owe, the details are
complete and correct according to the current tax owed.

Digital
interaction- Businesses and customers will be able to directly interact with
the HMRC regarding their taxes whenever it suits them, this provides them with
access to a personalised picture of their tax affairs, advice, prompts and
secure web messaging if needs be. Digital recording software will be attached
to the HMRC system which allows customers to have live chats with employees at
the HMRC for any queries.

A single financial account- Currently, most taxpayers if not all are not
able to view a picture of their entitlements and liabilities on one page or
screen, using the MTD system, taxpayers will now be to see a complete financial
breakdown in their account. This is very similar to an online banking screen
where businesses/customers are able to view all finances from one screen and
can access at any given time.

Tax in real time –
Tax in real time suggests customers will not have to wait until the end of the
tax year in order to see how much they owe to the government for tax, instead
HMRC collects the required information affecting the tax figures in real time
to help prevent errors and repayments owed building up for
businesses/customers.

Quarterly reporting-
One of the elements involve a report every quarter of the year, this means
rather than having one large tax return payment, every three months there will
be a requirement to submit records to HMRC directly on the financial software,
being specific this will have to be within one month of the end of each
quarter.

Paper records will
no longer be sufficient- Once MTD has taken effect, it will be
compulsory for all businesses to use this software to hold their accounting
records. Paper records will no longer meet the requirements of the tax law and
will not be valid. 

The main elements of the MTD proposition

Making Tax Digital
is a new system which has been introduced and will take effect in 2020 which
will be required for all businesses and landlords. It is a system where tax
records will be accessible online to all businesses and individuals whom will
have access to their own personalised digital tax account. HMRC’s aim is to
make the taxing system more efficient, effective and less complicated to comply
with.