On July 13, 2017, it was announced that MTD (Making Tax Digital) for VAT would come into effect on April 1, 2019. With that announcement, the Financial Secretary to the Treasury and Paymaster General in the UK changed the entire UK taxing system.
Like any transformation, the goal is to revamp the existing taxing system for a modern digital world. The MTD is designed to deliver a new digital service, making it easier for both, the businesses & accounting firms to get their taxing done right, straight from day one. It also means that there are minimal losses due to avoidable human errors and eradicating the uncertainty surrounding the intervening of HMRC into taxing. But from the businesses’ perspective, the most significant benefit is the reduction of tax filing cost.
This considerable tax system reform will be carried in phases, with the initial focus being on VAT. While the HMRC instructed it for the VAT-mandated businesses to meet the stage 1 deadline by April 2019, starting 1st April, 2021, the VAT-mandated businesses in the UK will have even more stringent MTD obligations. While these obligations have been pushed back tentatively due to the ongoing COVID-19 pandemic, they will come into effect soon. And for the very first time, these obligations will be accompanied by forfeits.
So, we thought we would take a closer look at MTD and see how we can help the accounting firms navigate through it without losing sleep over it.
Making Tax Digital – What It Is?
Administrations across the world are vying to establish themselves as the most advanced ones. The fastest route to do so seems to be making their services digital. The Making Tax Digital (MTD) initiative of HMRC is just another step in that direction. HMRC intends to make vital changes in how their tax system works, making it a lot more streamlined for the taxpayers, cost & time-efficient, and more.
This new MTD system will ensure that the information you file gets sent directly to HMRC, improving the records’ overall accuracy and eradicating any scope of transposition errors, ultimately hoping to bring down the amount of tax lost due to any avoidable inaccuracies. The accounting firms handling multiple requests at once can find it hard to strike a balance between complying with the new guidelines and meeting the requirement of their clients.
Making Tax Digital – Will It Affect Me?
For now, Making Tax Digital will not affect all businesses. So, the accounting firms might not see a sudden influx of requests from businesses all over the country. However, come April 2022, and all VAT registered businesses will have to comply with MTD service. So, in simple terms, YES, it will affect – businesses, accounting firms, individuals, charities Etc. – all.
As of now, though, the businesses, individuals, or charities with a taxable turnover above £85,000, which happen to be the VAT registration threshold, must follow the MTD. They must maintain a digital record of VAT and use the MTD-compatible software for submitting their VAT returns. Anyone with taxable turnover under the VAT threshold can join the MTD service voluntarily now, but after April 2022, it will be mandatory for all.
Making Tax Digital – What the accounting firms, Self-employed people, and other businesses can do?
We have been working with accounting firms and businesses of varying income groups for decades now. In all our time of working with them, the one thing that we have learned is that every customer wants to get their taxes filed right. And while we have been able to do so to perfection for all our clients, the stories of businesses getting into trouble with authorities just due to small avoidable mistakes are aplenty in the circle. Thus, whether you are a small business, a seasoned accounting firm, or just a self-employed individual looking to stay away from the HMRC scanner, here’s how we at Datamatics Business Solutions Ltd. can help you –
- Ready-to-Deploy Resources – From the seasoned CAs to the accounting firms, they all know how gruesome it can be to get the right resources when the tax season comes. Not to mention the constant need to upskilling those resources in accordance with the changing regulatory guidelines, and now, the changing tax norms due to the ongoing COVID-19 pandemic. Hiring & training new resources is a time-consuming exercise, even if you overlook the cost incurred during training new resources. But with the right finance and accounting partner by your side, you get ready-to-deploy resources to match all your taxing needs. These resources are well versed with the regulatory changes & handle multiple requests at a time to understand the intricacy of the business needs and tailor the solution accordingly.
- Quick TAT – The occurrence of the term “furlough” has become a consistent affair with the news in recent times. With the ongoing COVID-19 pandemic, many businesses, sadly, have furloughed a lot of their workforce. The unfortunate furloughing of the workforce has created a severe shortage of resources in some of the most crucial business functions, accounting being one. This has prolonged the TAT for the businesses and has made meeting the deadline a daunting task. You can address all that with the help of the right outsourcing partner by your side. Equipped with the right resources, these accounting outsourcing partners offer incredibly quick TAT and help you beat the deadlines without paying any penalties.
- Cost-Efficient Accounting – Even for the most affluent businesses, onboarding proficient accounting professionals is an expensive affair. Significantly, getting different resources for specialized requirements could add extra zeros to your annual budget without yielding much return on investment. Thankfully, when you outsource your accounting services, you do not have to bear the entire cost of the resource but just the cost for the service you are availing of. It allows you to focus your resources on other aspects of business expansion and takes the burden of meeting all accounting regulations off your shoulders.
- Technology Acumen – The whole point of MTD (Making Tax Digital) is to make the entire process technologically savvy and minimize human errors that have been causing severe tax losses and making the whole process a lot more inefficient. With a trusted outsourcing partner, like Datamatics, by your side, you get access to the resources who have the technical acumen to work on them. With everything available on Cloud, you have complete control and transparency over every aspect of your process. We leverage advanced technologies like Robotics, Artificial Intelligence, Machine Learning, Cognitive Computing, and Cloud to create a human-machine collaboration to deliver solutions to your business requirements seamlessly.
To sum things up, HMRC’s Making Tax Digital for VAT in the UK is here to stay. But there’s absolutely nothing to fret about. It will benefit the businesses in more ways than one, given that they employ the best experts in accounting & finance to handle their taxing needs. Ensuring conformity with the changing regulations, we indeed can help you with it. Should you need further details on it, you can speak to one of our tax experts straightaway.