Making Tax Digital is a government initiative to establish a digital tax system for businesses and individuals. This article provides an overview of MTD, its meaning, benefits, and implementation for VAT and income tax. It explains how MTD aims to make tax administration more efficient, effective, and easier for taxpayers.
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Making Tax Digital1 MAKING TAX DIGITAL Author Course Professor University City/State Date
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Making Tax Digital2 Making Tax Digital Meaning of Making Tax Digital Also referred to as MTD, Making Tax Digital is usually fundamental adjustment made to the UK tax system administration (ICAEW 2019). In other words, MTD is considered as a government initiative which sets out or establishes bold vision for digital tax system making it stress-free for businesses and individuals to acquire their tax and keeping on their undertakings (GOV 2019). Basically, MTD was aimed at making tax administration relatively more efficient, easier for taxpayers and more effective through execution of absolutely digital tax system. Basically, MTD involve making fundamental adjustments to the manner in which tax systems within an organization works; that is, transforming the tax administrations so as it is more efficient, more effective and easier for taxpayers (Xero 2019). MTD is the government’s flagship initiative that needs online tax payment and filing and digital record keeping. Under this notion, all taxes would be in this initiative, though only MTD for the VAT presently has actual roll-out period, with rest following in the year 2020 (ICAEW 2019). According toXero (2019), MTD for the VAT was launched officially in 2018 and is currently open to all organizations wishing to participate in using the MTD software. This pilot for the MTD is expected to end on April 2019, where the software for the VAT will be officially delegated for all VAT-eligible firms. After this period, one will no longer have the capacity to manually complete paper-based VAT returns but would be required to complete the VAT returns online at their HMRC VAT portal(GOV.UK 2019). Simply, if a business is VAT-registered with some VAT-eligible turnover, the MTD would therefore be applicable. As such, if one suspects a client or business would soon be in VAT
Making Tax Digital3 threshold, they should start keeping the VAT records on digital records using the MTD which enables them ensure legal needs for proper record keeping. Basically, it is common for tax accounts and records to be maintained digitally in MTD software or to be maintained through cloud-based application. Difference under the MTD is that software utilized by our businesses should be able to keep and maintain record specified within the guidelines, preparing the VAT return using any relevant information maintained in the digital records as well as communicating with the HMRC digitally. In case the records are current, MTD software would collate and prepare these returns for the business. It would later display these returns to the client and request the client to declare the returns are correct and that s/he is willing to submit the returns to the HMRC(Xero 2019). Once the return records are submitted to the HMRC, one receives confirmation via the MTD software. Furthermore, landlords and businesses that join the MTD for their income tax would be required to send some quarterly reviews of their expenditures and income to the HMRC using the MTD. In response, they are expected to receive estimated income tax computations on the basis of information given to assists them in budgeting for the tax(GOV.UK 2019). As such, MTD has its share of benefits in regards to VAT and income tax. For instance, MTD comes with improved accuracy and assists in building in several software products. In this sense, information is mostly directed to HMRC from the digital archives, this eliminates probability of reversal miscalculations (GOV.UK 2019). Further, MTD would be beneficial since it brings together every taxpayer’s tax details in a single place (Xero 2019).
Making Tax Digital4 REFERENCES GOV.UK 2019,Overview of Making Tax Digital; Viewed from, https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax- digital (Accessed at 31st March 2019), ICAEW 2019, Making Tax Digital; Viewed from, https://www.icaew.com/technical/tax/making-tax-digital (Accessed at 31st March 2019) Xero 2019,What is Making Tax Digital?Viewed from, https://www.xero.com/uk/resources/making-tax-digital/ (Accessed at 31st March 2019)