The government of the United Kingdom has been longing to put the tax return to rest. By the year 2020, the UK government aims to deliver a completely transformed and digitized tax system.
The desire results in making a remarkable action that will serve as the light at the end of the tunnel – as believed by the administration. The UK government then introduced the new and enhanced tax system named, the Making Tax Digital.
As per the non-ministerial department of the government, HM Revenue and Customs (HMRC), the MTD’s primary goal is to make the tax administration a more efficient, more effective, and much easier for taxpayers and/or businesses.
Since in the traditional tax system, it was mostly manual filing. The process of the UK’s previous tax system is somewhat complicated.Mountain-like paperwork, plus the hustle of the high possibility of errors are unavoidable.
But similar to other circumstances, the Making Tax Digital is normal to receive either negative or positive views from the business and taxation community. Though it’s considered much advanced than the previous tax system, there are glitches visible in the implementation of the MTD. The following are the probable disadvantages of the UK’s new tax system, MTD, to the world of business.
Taxpayers need to comply with the quarterly deadline
Under the system of Making Tax Digital, taxpayers will now have to meet their tax duties quarterly. This is far different from that of the traditional system where the submission of the tax records takes place annually.
This will create a tremendous adjustment for taxpayers, accountants, and agents since they’re used to meeting only one deadline per year. But with MTD, it’s not only two or three, but it will be four times than the previous tax system.
Reduced confidentiality of tax records and other information
Though the tax system will be shifted to digital form, security and privacy of the given details and/or information is presumed to lessen. The MTD reduces the confidentiality or privacy of the tax records and other information that will be kept or stored digitally.
The new tax system allows HM Revenue and Customs to access the provided details and/or information by taxpayers or businesses. It’s possible to even without taxpayer’s consent, or without them knowing it. This point of time feels evidently uncomfortable and unsecured for taxpayers.
Several uncertainties concerning information that aren’t provided
One of the disadvantages that came from taxpayers’ careful observation is that there are several details or information that isn’t provided. Thus, the action by the UK government lacks information concerning important matters.
It’s unclear where and to whom the exempted taxpayers will submit their tax records. The exempted taxpayers are those who are said to be ‘digitally excluded’, charities, and unincorporated businesses and landlords with yearly sales lower the £10,000 threshold.
Digital Exclusion caused by serious matters
Since the focus of the UK government and its tax administration is to merely move from the traditional to the digital platform of tax recording, it appears to have a problem. Even with the presence of MTD bridging software, how about those who are digitally excluded?
Those who are ‘digitally excluded’ are taxpayers who have no access to digital tools. This may be a result of religious beliefs, remoteness, age, disability, or any possible reason.
Thus, to whom will they submit their tax returns? How will they comply with their tax duties? Will they be exempted from charges for not meeting the deadline due to unclear details?
The business world itself is complicated and thus the taxation. With the desire to bring a better tax system to the business world, the United Kingdom took the risk to step forward to at least start figuring out its way to success.
However, downsides will always be present and will make the UK’s government journey tougher and more complicated. But since that MTD is freshly-baked from the oven, the world of business doesn’t have to shut its doors and give MTD a generous chance instead.
Thus, what lies ahead in the future path of MTD? How will the UK businesses respond especially by the time MTD will be mandated to all taxpayers? Follow the journey of UK’s Making Tax Digital and don’t hesitate to extend your thoughts.
Kath Ramirez embraced the dream of being a writer since she was in 4th grade. She took it seriously and she’s now a graduate of AB Journalism and a current writer to Australian and United Kingdom-based companies. Aside from writing, Kath also keeps herself busy spending time with her family, cherishing the role of a mom to 3 dogs and a puppy, reading random books, and diving into the world of photography. She’s not even a pro to whatever she’s engaged into right now, but one thing she knows, she’s happy and that’s more than enough.