The UK Government’s non-ministerial administration, known as Her Majesty Revenue and Customs (HMRC) made a jaw-dropping and extremely innovative initiative to put an end to the tax return and deliver the UK to a transformed tax system in the year 2020. The HMRC introduced the Making Tax Digital or the MTD to be the new medium to comply with the tax obligations as well as to collect taxes in the UK.
However, since that MTD is freshly-baked from the HMRC’s oven, there’s no assurance that it can be a 100 per cent effective and successful as the new baby of the tax system. So, what could be the MTD’s pros and cons? Read and find it out by yourself.
Making Tax Digital: Pros
The Making Tax Digital in now under the prying eyes of all the tax administrations all over the world. It’s one of the most sought-after events in the taxation history of the UK and the world. Now, find out how the MTD can be beneficial to the corporate world.
It’s more efficient
The taxpayers, as well as the ones working under the tax administration, are both smothered with tons of paperwork on their tables to work on. Well, say goodbye to the traditional and hassle tax system because the Making Tax Digital is already here.
With the use of MTD, the collection of taxes and submission of tax obligations are now more efficient. Possible and unfortunate mistakes will now be easily detected. The businesses expenditures can now be entered as they earned, resulting in a more accurate claiming process.
It’s more effective
The HMRC is carefully and patiently working with several software vendors that can be considered as MTD compliant. These vendors are the possible producers or developers of bridging software and/or accounting software.
The MTD bridging software or accounting software developed by vendors is the main instrument to be used by the taxpayers to conform to their tax duties. These lists of bridging software have client-friendly features to make it easier for the taxpayers to manipulate it.
It’s better and easier
Unlike the traditional system which is primarily done manually, the MTD makes the tax system a better and an easier one. It’s easier in a way that even though it’s transformed into a digital form, the features and processes are easier to operate and to analyse.
Like what’s stated in the previous key point, the HMRC and the bridging software developers are working hand in hand to produce software as client-friendly as it can. Aside from being one of the most progressive tax administrations in the world, the HMRC wants to deliver a tax system that’s much easier for the taxpayers.
Reduces stress and make it hassle-free
The world of business itself is stressful, and so the community of taxation. That’s why the MTD can highly be considered as a gift to taxpayers, businesses, and as well as to the whole UK tax administration.
The MTD very much helps in carrying the burdens of the tax collectors and make business life easier for the taxpayers. Moreover, this delivers a stress-free and hassle-free to both parties compared to the traditional tax system.
Eradicates piles of paperwork
In the traditional tax system, tables are occupied with tons of papers and accounting staffs are bombarded with lots of paperwork. But now that the MTD finally joined the taxation family, the use of papers will gradually turn zero.
The MTD bridging software will replace the papers and will soon be the new companions of the accounting community. In a wider range of thought, the MTD won’t only lay hands to help to provide a better tax system but also helps in reducing the use of papers which is very good for the environment.
Making Tax Digital: Cons
Given that the Making Tax Digital is still at the bottom of its journey in the world of taxation, misconceptions, uncertainties, or negatives feedbacks are still in a hot and boiling pot. Now, what could really be the probable drawbacks of the MTD?
More deadlines to meet
Unlike the traditional tax system, the MTD requires the taxpayers to submit their tax duties at least four times annually. This means that there would be more deadlines to meet by the taxpayers so to avoid possible charges by the law. The HM Revenue and Customs say that quarterly tax returns will most likely deliver a more accurate projection of the taxpayers’ tax dues.
Though the MTD bridging software is made to be client-friendly and easy to be manipulated and analysed, it can never be denied there are still people who aren’t that knowledgeable or truly clueless when it comes to the digital world.
That’s why if there’s a major thing that can be considered as a disadvantage of the MTD, that’s the digital exclusion. This could be due to having no access to any gadgets, no knowledge of digital manipulation, and so on.
The transition from traditional to digital
The transition from the traditional to a digitised tax system is not that easy. Accounting staffs might have a year of pending paperwork and the sudden change from the manual or the traditional to digital could add loads of work to them.
More possible fines due to missing the quarterly taxes
Since the tax obligations are to be passed quarterly, there’s more possibility of having fines if and only if the taxpayers won’t be able to meet the quarterly deadlines. Even the tax system changes, the fines or charges for delayed or unattended tax duties will remain.
Now that the Making Tax Digital will be fully implemented in April 2019, there would possibly be more to add on the list of the MTD’s pros and cons.
Will this be a success for the HMRC and the United Kingdom in general? Will this HMRC’s initiative be a message in the bottle to other tax administrations to innovate as well? Or will this bring chaos in the tax system?