How About the Digital Tax in UK?

Everything You Need To Know About Digital Taxes and VAT

Making Tax Digital (MTD) is a UK government initiative that sets out a vision for the ‘end of the tax return’ and a ‘transformed tax system’ by 2019. HM Revenue and Customs (HMRC) states that the main goal of MTD is to make tax administration more effective, more efficient and simpler for taxpayers.

Overview of Making Digital Tax

Business Tax Reform

Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.

HMRC’s ambition is to become one of the most digitally advanced tax administrations in the
world. Making Tax Digital is making fundamental changes to the way the tax system works –
transforming tax administration so that it is:

• more effective
• more efficient
• easier for taxpayers to get their tax right

Making Tax Digital for VAT

With regards to October 2018 update, HMRC (HM Revenue & Customs) has taken a major step forward in this ambition with the introduction of Making Tax Digital for VAT. Pilot service is open to around half a million businesses whose affairs are up to date and straightforward. It will be extended to most other business types over the coming months. VAT-registered businesses with a taxable turnover above the VAT threshold are required to
use the Making Tax Digital service to keep records digitally and use software to submit their
VAT returns from 1 April 2019.

As part of planning for the VAT pilot, HMRC continued to engage with stakeholders and listen to their concerns about business readiness for Making Tax Digital. Mandation for companies whose affairs are complex is delayed until 1 October 2019.
During the first year of mandation, HMRC will not pursue filing or record keeping penalties
where businesses are doing their best to comply with the law.

**(See the timeline below)


October 2018 Open to sole traders and companies (except those which are part of a VAT group or VAT Division) provided they are up to date with their VAT. Those who trade with the EU, are based overseas, submit annually, make payments on account, use the VAT Flat Rate Scheme, and those newly registered for VAT that have not previously submitted a VAT return, are unable to join at this point. Those customers with a default surcharge within the last 24 months will be able to join the pilot by the end of October 2018.
Late 2018 Private testing begins with partnerships and those customers that trade with the EU.
Late 2018/early 2019 Open to other sole traders and companies who are not up to date with their VAT, users of the Flat Rate Scheme and businesses newly registered for VAT that have not previously submitted a VAT return.
Early 2019 Open to partnerships and those customers that trade with the EU.
Spring 2019 Pilot open for Making Tax Digital customers that have been deferred.
April 2019 Making Tax Digital mandated for all customers (except those that have been deferred).
October 2019

Making Tax Digital mandated for customers that have been deferred. The 6-month deferral applies to customers who fall into one of the following categories: trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, those public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts), local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users. The deferral will apply to around 3.5% of mandated customers.


How HMRC is making it easier for individuals and businesses to get their tax right and keep on top of their tax affairs
The majority of customers want to get their tax right but the latest tax gap figures show that too many find this hard, with avoidable mistakes costing the Exchequer over £9 billion a year. The improved accuracy that digital records provide, along with the help built into many software products and the fact that information is sent directly to HMRC from the digital records, avoiding transposition errors, will reduce the amount of tax lost to these avoidable errors.

Smarter experience for individuals
The Personal Tax Account brings together each individual customer’s information in one online place. It allows customers to access the service from a digital device of their choice and at a time that suits them. It allows them to register for new services, update their information and see how much tax they need to pay. 

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