| MYTH - 1 | EXPLANATION IN HMRC MYTH BUSTER | WHAT SHOULD WE KNOW | WHAT CAN WE TAKE AWAY |
| Businesses will need to do four tax returns a year | Not at all. Businesses will not need to file four tax returns a year. | Yes, There is no doubt there will be more than one tax returns per year. | |
| The new digital accounts will integrate all the different information businesses already provide to HMRC into a simple, streamlined system. | "All businesses, with income tax, National Insurance contributions, VAT or Corporation Tax obligations will be impacted by MTD as they will need to keep track of their tax affairs digitally and update HMRC more regularly using digital tools..." They have to report to HMRC both quarterly and annually using software to file returns for them. | HMRC will also be testing your data from risk perspectives, which means you are more likely to get HMRC investigations on a regular basis. HMRC recently invested heavily on COP 1 & COP 2 teams. (Teams to carry out Criminal Prosecutions) | |
| Instead of one big, onerous tax return each year once a quarter businesses can check that the information they are collecting digitally is correct, and simply click "send" to update HMRC. | Pressing 'send' button without reviewing your data properly is a risky business. After all, don't forget HMRC is expecting additional billions from tax payers in return | ||
| MYTH - 2 | EXPLANATION IN HMRC MYTH BUSTER | WHAT SHOULD WE KNOW | WHAT CAN WE TAKE AWAY |
| 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. | Help is by default available online | . |
| 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. | |||
| HMRC has not published details as to how it will deal with those who struggle with IT or do not have access to reliable internet or phone signals. | |||
| MYTH - 3 | EXPLANATION IN HMRC MYTH BUSTER | WHAT SHOULD WE KNOW | WHAT CAN WE TAKE AWAY |
| Businesses don’t want to do tax digitally | HMRC admits that: less than 8% of VAT returns are filed using third party software. | Online filing of VAT is actually mandatory. | |
| Millions of firms already manage their tax online. 99% of VAT returns are done online, 98% of Corporation Tax and 86% of Self-Assessment returns are done online. | Most people use HMRC's software because third party software does not make the adjustments required for VAT | ||
| Many taxpayers 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. | 98% of corporation tax returns are filed online because it is mandatory to do so. | ||
| 86% of self assessment returns are filed online because the deadline is later than the paper filing deadline. | |||
| MYTH - 4 | EXPLANATION IN HMRC MYTH BUSTER | WHAT SHOULD WE KNOW | WHAT CAN WE TAKE AWAY |
| Businesses will need to keep extra records and the digitisation will cost a fortune | Anyone who is mandated to file under Making Tax Digital will have to equip themselves with the necessary hardware and software. | ||
| No additional records are needed for increased digitisation. These changes will contribute to our target to reduce business burdens by £400m. | By 2020, most businesses will be required to use software or apps to keep their business records and to provide regular updates of information." | HMRC is providing APIs so that software can 'talk' to it. Internet connection is also necessary to stay ahead with this digitalization | |
| For those who aren't already keeping records digitally, there will be free software and clear, simple advice on how it can be used. | In short, businesses who currently do not use software or computers will be required to do so, or engage an agent to act for them. HMRC is not providing free software. | You will in time be fined if you make errors in recording or sending your data. | |
| Accountants time will be required more if you wish them to check your data. They will have extra online submissions to check. You can ignore the accountant's involvement by directly submitting online. However, you do this at your risk of giving unnecessary data to HMRC | |||
| MYTH - 5 | EXPLANATION IN HMRC MYTH BUSTER | WHAT SHOULD WE KNOW | WHAT CAN WE TAKE AWAY |
| The new plans will increase errors and hinder compliance | Not true. The scope for error will be greatly reduced - meaning fewer businesses face the shock of a bigger tax bill than they expected at the end of the year. | Not at this moment. Probably at some stage in future | Many taxpayers will have to start using new software and learn bookkeeping whilst running their business if they want to reduce their accountant's cost |
| Annually £6.5bn is lost through error. These reforms will improve the quality of record keeping and reduce mistakes. | People will need to set up software to link to their bank accounts etc. | ||
| Record keeping software and apps will automatically link financial records with digital tax accounts | Apps do not automatically sort out bank feed: the customer still has to instruct what expenses are business or not. | ||
| Bank accounts can be directly linked to apps to automatically populate income and expenditure | HMRC's guidance is not the tax law. There is a limit how much guidance you can fit on a small screen. | ||
| Apps will signpost to relevant HMRC guidance | Tax liabilities can be estimated. Surely if MTD works as it is planned, HMRC wants more taxes to be paid to them. | ||
| Tax liabilities can be estimated and regular payments made to cover income tax and VAT liabilities. | Quarterly payments on account will be necessary | ||
| Late payment penalties will apply. | |||
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