There’s a statement released by the HM Revenue and Customs concerning the major goals of the UK’s new tax system, Making Tax Digital.
And that’s pertaining to the Making Tax Digital making current administration more effective, more efficient and simpler for businesses or taxpayers.
However, there are still lots of questions and misconceptions emerging due to changing phase from manual/traditional system to the digital system.
And if you’re one of the millions of UK taxpayers who are still confused about the Making Tax Digital, feel free to find comfort and peace of mind through reading this article.
This intends to tackle and list down the most-used words under the Making Tax Digital system.
It’s necessary for taxpayers like you to familiarise themselves to Making Tax Digital jargons to slowly eliminate the confusion and to avoid unwanted misinterpretations regarding MTD.
As a taxpayer, you might have received notices regarding the requirements for MTD for VAT and you might observe that HMRC often refers to an “agent”.
Agents can be an authorised firm or person who acts or submits VAT returns on behalf of their clients which are the taxpayers.
In MTD’s framework, business is beyond a corporation, institution, or organisation that markets their products/services to earn profits.
Business refers to a landlord, self-employed, partnerships, and limited companies who submit VAT returns in order to comply with the quarterly tax return.
3. Business Tax Account (BTA)
The Business Tax Account or commonly known as BTA is an account with HM Revenue and Customs that’s accessible online.
The landlords, limited companies, partnerships, and sole traders can access BTA in order to review and/or monitor their tax information.
You can already access your BTA but it’s believed that HM Revenue and Customs is possible to add more features to the online service as MTD continues its reign.
Thus, it’s advised for you to always keep your eyes and ears on the further changes that may take place in the near future.
4. Bridging software
The bridging software is an MTD app or tool that connects the stored data in spreadsheets with HM Revenue and Customs.
This means that bridging software helps in enabling VAT data to be successfully submitted digitally.
However, as a taxpayer, you must keep in mind that the bridging software you’re considering is MTD-compliant.
Also, for additional knowledge, the said software doesn’t cover all the MTD for Vat requirements like digital record keeping and upholding digital links between data.
The client refers to a person or a business that hires an accountant or bookkeeper to act on their behalf. Thus, as a taxpayer, if you seek help from agents, you’ll more likely be referred to as a client.
6. Form 64-8
Another ice-breaker information concerning the MTD for VAT is the justified definition of Form 64-8. It’s a form that gives approval to agents to act or submit VAT returns on behalf of their clients.
To make it precise, it’s a paper form that authorises the agent to discuss and/or disclose information regarding their client’s tax matters.
Without this form, the agent won’t be able to fulfil his/her duty which may cause possible trouble in complying with the tax duties.
This jargon isn’t referring to any software, tools, or services available in MTD. MTD-compliant means that software is capable to meet all the needs of HM Revenue and Customs’ MTD rules.
Moreover, MTD-compliant software will be able to help agents, clients or taxpayers in meeting their tax obligations digitally compatible with the current requirements of the UK’s new tax system.
8. MTD for VAT
This refers to the first main phase of the MTD initiative.
And just this April 1st of 2019, most of the VAT-registered businesses with revenue beyond the VAT threshold will be obligated to comply with their tax obligations digitally.
This MTD jargon refers to businesses, individuals, landlords, limited companies, partnerships, and sole traders who are accountable in paying their respective tax obligations in a quarterly manner.
The HM Revenue and Customs can also refer to you as a customer to also comprise as claimants.
Now that you’ve figured out the most-used terms under the MTD, you can now peacefully proceed as a responsible taxpayer of the United Kingdom.
Don’t hesitate to share the knowledge you’ve got with your colleagues.