The idea of hosting the Making Tax Digital came to HM Revenue and Customs’ mind like a flash of light back in the year 2015. And in just a snap, it causes a major shakeup into the world of the taxpayers. With the sudden and big change happening in the UK’s tax system, it’s inevitable to have or construct misconceptions concerning the newly introduced digital tax system.
What is Making Tax Digital about and what are the emerging misconceptions affixed to it as it makes way to the UK’s tax system? Read further as this article lists all that you might want to know.
Digitally excluded taxpayers and/or businesses will be required to comply
There are certain exemptions made under the Making Tax Digital for VAT and exempting digitally excluded businesses is a part of it. That clearly means that they aren’t and they won’t be forced to comply with their tax obligations through online filing.
The exemption for the digitally excluded includes those who don’t use or manipulate computer for religious reasons, those who aren’t capable to comply because of age, disability, or location (or for any another valid reason).
Bridging software will be available for free
Another misconception upon the arrival of the MTD is that the businesses and the clients will be able to get access to the MTD-compliant bridging software for free. It’s absolutely impossible for the bridging software developers to provide services and/or products for free.
Since that the MTD for Income Tax is yet to set until 2020, the government doesn’t guarantee to provide free bridging software for MTD for VAT. It is expected that free use or access to software depends on the market or software developers or providers.
A spreadsheet will no longer be applicable to comply with the MTD
The draft guidelines for MTD for VAT state that VAT returns must be filed with the use of “functional compatible software”.
Though that it hasn’t yet confirmed whether the use of a spreadsheet is still applicable or not in the new tax system, the examples in the draft VAT notice and the postscript to the notice includes a number of circumstances where spreadsheets are used. Therefore, it’s expected to be made clearer in the final version of the notice.
The MTD for Income Tax won’t be continued after the MTD for VAT
The MTD for Income Tax will still be on board after the MTD for VAT. The only for the “delay” is that the Government will not broaden the scope of MTD beyond the VAT not until the system has been shown to work well.
In early 2017, Mel Stride, Financial Secretary to the Treasury, said that they’re very keen to signal to everybody that they’re serious about it [MTD for Income Tax] and it will happen. He also said that there will be no question of any further delay on this [MTD for Income Tax], and they’re making sure that they’re ready for it.
Businesses are required to keep electronic copies of all the documents
This misconception is false since there are no desiderata to scan or to keep electronic copies or versions of existing documents.
The protocols postulate the information that is mandatory to be kept electronically (primarily the major entry codes) but copies or versions of documents aren’t incorporated in this list.
The stated and/or written misconceptions are only some of the many misconceptions concerning the application of the new tax system in the United Kingdom. Since it’s still as fresh as a newly-baked cake, judgments are always being welcomed as well as the possible uncertainties about the Making Tax Digital.
However, whatever the possible consequences or outcome will come by the newly implemented tax system, it’s clear enough that the HMRC has brought another remarkable event in the history of British taxation. The Making Tax Digital is still on its way to prove itself and what impact it can make in British society particularly in the business and taxation community.