Making Tax Digital – The Big Plan!

 

The tax system is undergoing something of a revolution with the new system HMRC is implementing. HMRC is striving to simplify the system and provide quicker access to taxpayers and business people who need it most. Already they are working on a plan that over the next four years they will create one of the most advance digital tax systems on the globe.

 

Some have said that self-employed individuals won't be ready for this revolution especially seeing as they're not used to filing quarterly returns. This is actually a common misconception. All this means is that instead of putting together one big system for the year we taxpayers can check quarterly and update their information and verify its accuracy. They can then send the update to HMRC and it's that simple. This is nowhere near the same as filing a full tax return each and every quarter as commonly feared.

For self-employed individuals that use a cash basis system they want the update to be adequate on their own to indicate overall taxable profit and therefore make it easy to figure what's owed.

Their goal is that by 2020 we can reduce the overall costs of managing tax systems for business by as much as £400 million annually. Digitizing the system will help a great deal in this process and provide quicker and easier access to their records that in theory will help save both time and money.

The conception here is that most business are unprepared to use these digital devices because they have no experience using them is actually yet another misconception. Every business uses some form of technology whether it's a system of email or online banking and bill pay, to some degree they are familiar with it. The same can be true of digital tax systems with 3.7 million businesses already using this in some form. For those businesses that aren't up to date with the modern smartphone and computer systems HMRC is offering alternatives such as phone transactions and provisions that allow you to update via proxy.

For most businesses the transition will be straightforward especially those that are already keeping records digitally. For those who aren't as prepared they hope to provide free software and careful instructions and tutorials as well as extra help for those who need time to adjust to the new processes. They're also introducing the changes gradually as not to shock anyone over night.

Businessmen and women will have to start using the new updates starting 6 April 2018 at which they will provide HMRC with digital updates and find themselves able to make payments regularly and on their own initiative. For those businesses paying tax this transition will also start in 2018 while those working with VAT payments will see these come online in April of 2019 and those paying corporate tax will see the changes by the same month in 2020. 

Each stage will involve a series of tests and rigorous vetting process to ensure the best service before the programs go mainstream as well as to provide assistance to those who need the extra help getting connected.

The system will be 100% digital by 2020, which will eliminate a great deal of the bureaucracy of forms and red tape. Business will be able to update and pay at their leisure moving to more a “real time” format for their cash flow.

These services are surprisingly in high demand as we've been told by a number of waiting entrepeneurs that they'd rather forego the waiting period that takes place before they know where they are. This allows them more certainty and therefore a better planning experience while there are others who want to pay as the go so they can treat their taxes as a regular business expense rather than as a nasty surprise.

Digital tax accounts will allow user to manage everything related to their taxes as well as the many customer service options and added features. They can also find tutorials, webinars, and help on social media to learn the new system and the tricks of the trade. The goal of HMRC is to make taxes simple and less painful for Entrepeneur’s and businesses everywhere. You'll also of course be able to manage contacts and security as well so you won't go bed worrying about death AND taxes.

Making it simple will also reduce the number of errors. It's always best to pay the right amount the first time rather than having to file a bunch of new paperwork later. These digital forms will reduces these expenses in terms of time and money by making it easier to submit accurate and up to date information.

The idea here is not to disrupt the balance of things between businesses and tax agents. In fact studies show that businesses will still want to use an agent to file taxes on their behalf despite some of the concerns otherwise they won't be out of the job. It's understandable that people will be at unease during a transition like this but there is nothing to be alarmed about.

We've consulted and continue to work with a number of stakeholders for different takes and views on these changes while also encouraging those with a vested interest in this to get involve. We've had round table discussion as well bringing together business with the software providers. We also welcome feedback from all businesses that we would be working with.

In order provide better service and to explain how this new system will work HMRC have released a video on the main YouTube channel explain how it all works. It basically breaks down how businesses and self-employed individuals would experience the new system. It then further goes on to explain how the transitions (including the switch to a quarterly system) will actually be beneficial for everyone in the long run.