HMRC set the record straight regarding misconceptions
The end of the annual tax return may appear a most attractive proposition but Making Tax Digital has also aroused doubts and criticism. Like any new idea, however, this is only to be expected especially when it throws up questions. HMRC have attempted to answer some of these questions by publishing, ‘Making Tax Digital: Myth-Buster’.
Myth: Businesses will need to do four tax returns a year
Not true. The new digital accounts will integrate all the different information businesses already provided to HMRC into a simple, streamlined system. Instead of one onerous tax return each year, once a quarter businesses can check the information they are collecting digitally is correct, and simply click “send” to update HMRC.
Myth: This does not consider those who are digitally excluded
There is no question of forcing those who cannot go digital to do so. Help will be available for businesses who struggle to use digital tools.
People who genuinely can’t use digital tools will be offered alternatives, like nominating someone else to update their information for them, or giving information by phone.
Myth: Businesses don’t want to do tax digitally
Millions of firms already manage their tax online. The vast majority of tax returns are already filed online:
- 99% of VAT returns
- 98% of Corporation Tax returns
- 86% of Self Assessment returns
HMRC believe that there are many taxpayers who want more certainty over their tax bill and access to an in-year picture of their tax position, which their new digital accounts will provide.
Myth: Businesses will need to keep extra records and the digitalisation will cost a fortune
No additional records are needed for increased digitalisation. These changes will contribute to the Revenue’s target to reduce business burdens by £400 million.
For those who aren’t already keeping records digitally, there will be free software and clear, simple advice on how it can be used.
Myth: The new plans will increase errors and hinder compliance
The scope for error will be greatly reduced apparently. This will mean fewer businesses will face the shock of a bigger tax bill than they expected at the end of the year.
Annually £6.5 billion is lost through error. Digital tax reforms will improve the quality of record keeping and reduce mistakes.
What about the myth that this will not cost businesses? Obviously this isn’t a myth otherwise it would have been listed as such.
Most businesses use accountants, do you really think they will do this for free? Even “simply click “send” to update HMRC” involves time and effort to ensure the data being sent is correct.
Having to send PAYE details to HMRC each month is a pain, we don’t want to have to send more information on a regular basis. This may be great for HMRC but businesses get absolutely nothing out of this additional bureaucracy.