HMRC Releases New Video on Tax Digital account creation for Business
In order to transform the environment of taxes for business into a more fully digital platform HMRC created a video on YouTube that outlines how these digital tax accounts work when introduced to all small to medium businesses in April of 2018
The video itself only boasts just under four minutes of length. The focus is a very simple approach to explaining the benefits of these digital tax accounts. It starts by showing you the self-employed plumber who foregoes the use of accounting software.
This very brief video (3 minutes and 42 seconds to be exact) will show how this amazing software can help revolutionize the way sole trader manage their liability and how simple it's made with their new digital tax accounts. The app available for them to download, will require them to update their current expenses and then gives them a monthly estimate of what they owe in taxes. The plumber then in their example, photographs receipts onto his phone to be uploaded into his tax account via smartphone as a way to keep track of them.
At this point it's explained after snapping these photos that the tax account has been updated. He now knows what he owes and has nothing else to worry about other than setting aside the money for when it's time to pay the tax man. It's also quick to point out that this doesn't equate to a transition into quarterly tax reporting through the same process as the submission of a VAT return.
The majority of 5.4m business throughout the U.K are already managing their taxes on the internet, in fact we’re at a point where over 99% of VAT returns are submitted this way. Most customer's, however tend to use middlemen in the form of tax advisers and accountants to complete their taxes on their behalf. This is an issue HMRC will need to confront before a new system can take hold.
They claim that they are aiming for the year 2020 as the year that the old system for annual tax return filing will be thrown out and replaced with “Simpler online Systems”.
These new digital accounts bring together an array of information on file and combine them into a single process simply by submitting it into an app designed for record keeping that sends it to HMRC.
These plans for quarterly reporting however, have known no shortage of critics. Tax advisers, accountants, and other professional tax institution have put the idea under severe scrutiny.
According to HMRC you can replace one big return each year with a system that allows businesses verify their information and keep it up to date each quarter.
Their argument is that it will allow small businesses to keep better track of their tax bills by switching to this simplified model of quarterly reporting. .
HMRC stated: ‘Many taxpayers want more certainty over their tax bill and access to an in-year picture of their tax position, which their new digital accounts will provide. We know that too many viable new businesses go under when they receive their tax bill simply because they didn’t know how much to set aside. Digital tax accounts will help fix this issue.’
For many of the small businesses who fail to store digital records there will be many options and features designed just for them including some of the free features for those with fairly simple, run of the mill tax filings. Included will also be very simple, concise and easy to understand instructions on how to use the account.
Soon they'll be consulting on the details of system operation.
Some concerns have arisen that their new plans could lead to a digital split of sorts for those with access to broadband and those without, as the latter will have a severe disadvantage. Even worse will be the disadvantage to those that own smartphones or the latest computer systems. These individuals will be offered certain alternatives as contingency. For example they could update their information over the telephone and execute actions on their account via proxy.
It's not currently clear when HMRC will reach out to tax payers regarding their digital accounts, which are expected to be in full force soon.
An animation called Making Tax Digital video on YouTube which show how the new digital tax accounts will operate can be found on HMRC’s official YouTube channel