The other Challenge
People sometimes take it very lightly and believe that with the help of the measures that the government is taking, the trouble of hiring additional staff and buying software will be no big deal. But if we look into it, certain challenges might add up to the problems in the implementation of this relief plan.
Being experienced accountants in Milton Keynes, we believe that the infrastructure of this plan is quite distorted. An example best suits here; the cart is placed before the horse. Now you see, instead of setting up a proper mechanism, testing it, and then enforcing the digitalization, the plan is going the other way around by enforcing the system first. People have the view that the infrastructure of a plan, specifically MTD should be set up first, tried, and tested multiple times before rolling it in legally.
Also, the main challenge, which I think has not been taken under consideration is that the less privileged people might be deprived of high speed internet connectivity. This matter should also be carefully analyzed before the implementation of this plan.
How MTD Facilitates Individuals
The personal digital tax account system gathers the information of each individual in one online place. This way, the customers have access to all the services from the digital system of their choice, at the time that best suits them. It provides people several facilities, like signing up for new services, keeping their information updated and keeping a track of their records, keeping tabs on how much tax needs to be paid by what deadline.
All the information that the HMRC gathers from different sources is carried out in distinct systems. This requires customers to report the information to HMRC using a self-assessment tax return. HMRC is taking serious measures to collect and combine all the data in the internal systems, which will automatically take care of all the information that different systems hold about a customer’s circumstances, their earnings in a digital account, and other records. This way, the customers will not have to report from time to time on their own.
It has been onerous for customers to send information and inform HMRC about their income. More than ten million customers file a tax return in order to report to the HMRC about their earnings and tax records, under self-assessment. This burdens the customers and is unproductive for the HMRC too, because the information carried out and sent by the customer is sometimes incorrect or has loopholes, or often submitted too late which results in some alteration in the right amount of ta being collected at the right time, upon which, HMRC supposedly takes recovery actions. It also causes unnecessary penalties and fine charges for customers. Though it is not necessary that HMRC’s judgment might always be right, there are possibilities that they had any misunderstandings under several circumstances. If a third party, on the other hand, rather than the customer or any of their agents, provides additional information, it might lessen the burden of reporting to them and bring down the chances of errors and the amount of time wasted.
As soon as the Personal Tax Account plan is implemented, customers can notify HMRC when they need to change things. Customers will no longer have to wait to complete the tax returns when the year ends. HMRC will keep track of their tax payments and will let the customers know from time to time when the time is here to complete the tax and what amount they have to pay. They have already started to use the information that has been recorded and are looking forward to making better use of it by connecting it with their customers and presenting them with their personal tax accounts.
Cost Analysis for Switching to MTD
If you are worried about how much this whole switching to MTD process will cost, well we have good news for you. HMRC will not be charging a pound for switching from your manual tax system to MTD. However, some internal things like renewing your internal business might add up some costs. HMRC has estimated that the average cost for this installation would be approximately £280 for each business respectively.
The cost analyses for this is likely to result from several things like upgrading existing software or in some cases, buying new software and apps, purchasing or upgrading hardware, and other expenses related to accountancy and agents.
Will Making Tax Digital reduce the chances of Audit or Compliance Checks?
HMRC looks forward to making things easier for small businesses through MTD. It will help them get their taxes right away, reducing the chances of minor mistakes and errors, undesirable compliance checks, and delay of time. This will also prevent the customers from unnecessary penalties and make businesses feel confident that they are handling things the right way.
New Small Business Tax Account
· Personalized Digital Tax Account
Personalized Digital Tax Account is the main objective of Making Tax Digital. It contains all the information that you have provided to the HMRC. Including the record of the taxes you pay, and other relevant areas. You can easily access the information and can request any changes if there is a need.
A Digital Tax Account will provide you complete access to your business’s tax liabilities in just an instant. A personalized digital tax account is much like an online bank account, except, the only thing that is different is that it tells you the amount of money you owe, rather than the amount of money you have.
HMRC will use all the information provided by the customers to mold its services according to the needs and requirements of particular customers individually.
· MTD Will Help Understand How Much Tax is owed
Making Tax Digital is going to be beneficial in so many ways. HMRC will read and process details to determine the amount of tax a customer is liable of paying. This process is planned to be carried out in a limited period of time and will save time. This will prevent errors and incorrect entries and will ensure that the customers do not get charged with fines and unnecessary penalties.
How MTD is Beneficial for your Business
As I mentioned above, Making Tax Digital is going to be beneficial in so many ways. It is a government initiative for the alteration of the current onerous tax system. All businesses will be able to manage their taxes digitally through accounting software and other measures. Sending HMRC information of completing tax returns will cut off to sending them information on a quarterly basis, which would lessen the burden on customers. Businesses will have access to all the data they provided digitally.
Now let’s talk about the benefits businesses will attain from MTD. We have pointed out some of the key benefits below:
- Gain a business’s tax information in real-time
- All the tax information records and interactions will be in one central place
- Interacting with HMRC will become easier when both the businesses and HMRC will have a comprehensive overview of all tax information in one place.
However, it is possible that some businesses might find these benefits troublesome, as it will include submission of information to HMRC on a more standard basis than before.
We suggest that all businesses have an up-to-date information record of their businesses’ finances to make business decisions easier and quicker. At present, the value of digitalization is worth more than anything else, so I don’t think a business would be able to prosper without a digital presence of its reliable information.
After the implementation of MTD, everything will change. If we look at the bright side, businesses will have an opportunity to get control of their finances, to digitalize and modernize their systems, and get valuable information at the right time. It is time for small business firms to level up their tax game, and enter into the digital world of ease.
We talked about how there are a number of organizational benefits of MTD present, we cannot deny that by implementing this new plan, businesses can attain a better experience.
We suggest you take a look at the brief idea of benefits for businesses we have prepared.
- Businesses will spend less time on keeping track of the record with the help of book-keeping software.
- Businesses will help management stay up to date on their overall performance on a regular basis.
- They will be able to take important business decisions at the right time.
- Businesses will be able to easily prepare budgets to reach tax liabilities.
Now what the businesses have to ensure on their own is that whether they have the right software to take care of their accounting matters. We suggest you make it a part of your business and roll your software in, or update it as soon as possible rather than waiting around for HMRC to put it on you.
The Next Step
Accountants and small businesses better prepare themselves to participate in MTD. However, there are some changes that the accountants and businesses need to implement into their work and become MTD-compliant, changes as, commence using new and upgraded digital accounting software.
This step is a good head start to get started with MTD and get to know how to work with digital submissions, exploring new options, and while doing that, make some gradual changes in your business. This will be really helpful since you will already be prepared, and will be able to deal with digital submissions so when MTD arrives, it won’t bring any hurdles for your business.
How Accountants can help
Digital Accounting is going to create opportunities for a number of people, but in some cases, it might also be a risk. Tax advisors and accountants including accountants in Milton Keynes will reach out to their clients and send them the message that MTD is looming nearer. As these changes become prominent, MTD integrated services’ demand is more likely to increase. However, several customers will still have to have ta compliance as they might need their tax agents to do more than they did in the past.
Experts have the view that accountants will find it easier to advise and guide businesses using digital accounts through the MTD process. Accounts are supposed to give their clients tips and tricks that will save them tax via the purchase of goods for business. Businesses that are willing to invest in the adaptation of this, are more likely to be profitable firms in the near future – a new world that will come into existence through MTD.
If you have come this far with our article, you can probably see that Making Tax Digital is not that much of a difficult plan after all, when you have access to the appropriate software for the new system, centralized storage for data of your taxes, and a tax advisor or an accountant which you can easily choose from the many accountants in Milton Keynes. All these measures will lead you to MTD, which will decrease the effort, time, stress, and unnecessary penalties and charges due to incorrect information. Making Tax Digital is going to be proven to be a good thing for your business.
Everything about this plan might not be clear or understandable to you at the moment, but once the entire process is in place and the plan is implemented to businesses, the complete magnitude of this change will be comprehensible. It is very effective for self-employed people and small businesses as their whole taxation system will be digitalized and they will no longer need to take care of the receipts, invoices, and manual files containing the records related to tax. There’s still some uncertainty about how it will affect the businesses but what could possibly go wrong with digitalizing things in a digital world.
Contact us today to take advice from some of the most expert accountants in MK to understand how this change can impact your business.