The Tricky yet Compelling Innovation of Taxation in the UK
The emergence and continuous development of technology are evidently unstoppable and truly uncontrollable. And the business industry is just one of the millions and billions of the beneficiaries of it.
In the United Kingdom or the UK, a non-ministerial department known as Her Majesty’s Revenue Customs or HMRC initiates an innovated version of taxation system – the Making Tax Digital or MTD. For better learning and knowledge, this article tackles how the UK government, HMRC in particular, is transforming its taxation system in line with technology and the modern world. Read and find out.
Know these jargons for better understanding…
HMRC – an acronym means Her Majesty’s Revenue and Customs, HMRC is a UK Government’s non-ministerial department that’s in charge for the collection of taxes, payment of several forms of state support and the management of other supervisory regimes as well as the national minimum wage.
MTD – it’s HMRC’s initiative to replace “tax return” in a digitised manner. MTD stands for Making Tax Digitals and its primary goal as per HM Revenue and Customs is to make tax administration more potent, more competent, and simpler for the taxpayers.
VAT – it stands for value-added tax. A VAT is a consumption tax settled on a product when valued is combined at each stage of the supply chain – from production to the point of sale.
Bridging software – it’s a software that’s able to communicate with HMRC’s systems in consideration of Making Tax Digital commitments.
Tax is tattooed to anyone who earns and makes money in and out of the world of business. A person, an institution or an organisation who pay their corresponding taxes are called taxpayers. It’s a taxpayer’s duty to pay tax to avoid being punished by the law.
In the United Kingdom, the HMRC made an initiative to make the taxation system more effective, more efficient, and easier for taxpayers to get their tax more accurate in a speedy period of time. The HMRC aims to be one of the most digitally progressive tax administrations in the world- and that made them push through the Making Tax Digital or MTD.
The MTD is one step forward to HMRC’s goal. Exclusively launched in the UK, the MTD is now making a great difference especially in the idea for the “end of the tax return” and a “transformed tax system” in the year 2020.
This tricky movement is yet considered as one of the most compelling innovations in the context of taxation in the UK. It is complex in a way that changing a traditional system of a serious matter that’s being done worldwide is no joke.
But here’s the UK’s HMRC facing all odds to achieve its goal and to make a second to none taxation system in the whole world. The big question is how did they come up with an excellent innovation of a serious matter such as taxation?
Timeline of Implementation of the UK’s Newest Taxation System
In January to June of the year 2017, digital tax accounts demonstrate taxpayers an outline of their tax liabilities in one place.
In July to December year 2017, businesses, self-employed people and landlords with revenue beyond the VAT threshold start amending HMRC quarterly for Income Tax and National Insurance obligations over accounting software
Starting from April 2019, the VAT returns are mandated that can be filed through bridging software that is MTD compliant. In this year, businesses, landlords, and self-employed people with revenue between the lowest MTD threshold of £10,000 and the VAT threshold begin apprising HMRC quarterly for Income Tax and National Insurance obligations through accounting software.
By the year 2020, the MTD will be fully mandated with the help of different bridging software in the UK. This is to be easier for the accountants, business owners, bookkeepers, and landlords to comply with the MTD for VAT.
So now, that the birth of the UK’s newest taxation system is on set, what could be their next step? The world is its first possible witness to its probable success. It may take a long, rough road but as the HMRC’s ambition to be exceptional in the world’s taxation system is alive, the goal will live on.
Kath Ramirez is a writer in profession and passion. She believes that everybody can write but not everyone can write with good content and effectively reach out for their audience. Kath believes that writing is one of the million rays of the sun to relieve stress and anxiety. Aside from writing, she indulges herself to reading random books, photography, dancing, and eating pastries which her little sister makes most of the time. She is now a writer for My Digital Bridge of England and Wales – an accounting and payroll software excellent for Umbrella’s and PSC’s.