Making Tax Digital is a UK government initiative which sets out a unified vision for a ‘transformed tax system’ and ‘the end of the tax Dodge’ by 2021. HM Revenue and Customs state the aim of MTD as follows: ‘to make tax administration easier and simpler for consumers, businesses and other people in the UK’. However, what exactly does this mean? What can we realistically expect from the plan drawn up by HM Revenue?
Reduce the Amount of Evasion
Firstly, there will be some changes to the way that corporation tax pays in the UK. The main intention behind making tax digital is to reduce the amount of evasion that takes place and to encourage more active taxation and self-assessment by multinationals. By putting more emphasis on the incorporation of corporate structures, the amount of tax that can be attributed to them will be substantially reduced. This is important because many companies are able to save large amounts of money in the corporation tax they pay in comparison to the amount they would be required to pay if the location of their head offices was not UK based. The changes to corporation tax that are planned by the government are aimed at helping UK businesses in particular.
Help the Overseas Investment Community
Another significant feature of the Making Tax Digital initiative is that it designs to help the overseas investment community. This is because many overseas investors have large stakes in UK property and rent out properties. By putting more emphasis on the transfer of property and rental income abroad, the overseas investor will find that making tax payments in the UK using their own money can save them substantial amounts of money.
Manage the Accounting Records and Report
The second part of the plan is the introduction of new and improved accounting software. This designs to revolutionize the way that companies manage their accounting records and report on them. The aim of this initiative is to make sure that the amount of tax paid by UK companies is as low as possible. The main aim behind the intention of the 2021 tax digital records is to promote savings in the UK’s public sector by making it easier for businesses to reduce their tax bill.
Simpler and Cheaper to Use
The progress in the world of accounting software has made it simpler and cheaper to use. The creation of a single and universal platform is one of the key features. This will mean that small businesses and other organizations will be. Able to take advantage of the new digital tax digital records. The new tax proposals should already be using such systems in place.
Enable Businesses to See
The third element to the plan is that the UK tax authority has introduced measures that will force large businesses to account for all of their income on a single consolidated document. The document will enable businesses to see exactly where they are making their income. This measure is necessary because businesses in the UK must keep up with the tax right. Keep on top of their finances if they want to continue to stay afloat. Accountants have been calling on large businesses to join them in recording all of their income. This will allow them to easily calculate their tax liabilities and future tax implications. The new digital tax record would make available to the tax administration within a year.
Reducing Errors in Public Record Keeping
The fourth element of the plan is that a proposal has been launch to create a new government body that would oversee all aspects of reducing errors in public record keeping. These mistakes have been blam on a lack of staff in the tax administration department. The new body would focus on making sure that this happens. The spring budget 2021/Ramsay budget 2021 will be the first budget. Where the government will transfer the responsibility for ensuring accurate tax records to an external organization. A statement from the finance secretary expects any day.
Reduction in the Rate of Tax Paid by Businesses
The fifth element to the success of the making tax digital scheme is a reduction in the rate of tax paid by businesses. They will be able to reduce their current turnover in a number of ways. Which include invoicing, using a paperless computer system, and printing statements instead of using the old paper and ink systems. There is also a proposal to make businesses more aware of their own productivity in terms of customer service. This can reduce the pressure on staff to perform without the fear of losing customers.