Every once in a while, we are witnessing some changes in the financial system and state’s regulations. This time, we are having the tax digital phenomenon which a lot of people are not aware of, nor they now what it is. What you need to know for a start is that you will have your account registered for this purposes that you will use to send needed documents. First of all, it is a way more efficient than any other system before regarding the tax payment. As people often comply too much on bureaucracy and paperwork, the country wanted to reduce that and they came with this concept.
Eliminating of annual tax returns
We all know how boring is to collect all the papers and send them. Instead of the boring annual tax return procedure that you have been performing all the years, you will only send documents to HMR for times per year. However, it is not about sending tax returns every quarter of year, but rather more financial updates. The concept is the part of global digitalization and will produce positive results and reduce a possibility for an error as well as the level of complexity.
It has started!
Right after the pilot program was introduced, the concept rolled out and became active since 1st of April. Each company that has VAT sale over the threshold was obliged to send documents using software that was specifically created for this purpose. There is software like Free Agent that are developed for this purpose only which allow you to send documents to HMRC using this financial platform. We could say that the concept is still in the development phase as some details are being fixed and we can expect that everything will be set up by the end of 2020.
Fail to comply with MTD and get penalized
Since the switch began on the 1st April this year, HMRC stated that they do allow some adapting period for the businesses to settle and implement the system and use it. The adapting period’s length has not been stated but it is considered by default that you should place and interconnect the system within the period of three months, which is the beginning of August. Still, have in mind that you should conduct your process of software adaptation before the adaptation period ends, as you could face penalties and fines.
Access to business’ performance through the software
The whole switch to a different way of taxation performs because of the real time access to financial data. As the goal of the whole concept is enabling HMRC to have a live update on your finance, you will utilize a form of accounting program. For a start, an Excel’s spreadsheet is just fine for a start, but the things will have to become more sophisticated as the spreadsheet document should be connected to the tax account. It remains to be seen whether the developers will come up with the solution at any time soon.