Corporate Tax » Making Tax Digital – An opportunity for digital tax transformation

Making Tax Digital – An opportunity for digital tax transformation

Companies are risking not having their plans fully implemented and tested now, or before the deferred deadline for “complex businesses, says Kim Hau, senior proposition manager for ONESOURCE Indirect Tax, Thomson Reuters.

HMRC’s Making Tax Digital (MTD) for VAT deadline may have come and gone but a recent Thomson Reuters survey of UK tax professionals’ attitudes and readiness for MTD found that 56% have yet to fully implement their MTD plans.

While half of companies reported that they were impacted by the April 1 deadline, only 25% said their current processes meet HMRC’s new requirements and 58% stated they have a plan yet to be fully implemented (compared with 70% in November 2018).

Considering the pace at which tax is being digitalised across the globe, organisations need to start taking a much more proactive approach to their tax compliance. The survey looked at when companies expected to be “ready” for MTD for VAT, and 64% of respondents stated that they will be ready in the next six months, with 36% stating it will take them 6-12 months to complete their preparations.

With HMRC striving to be the most digital tax administration in the world, businesses can expect a lot more changes to come over the next 3-5 years. There is an opportunity with this latest legal requirement for businesses to get to grips with their indirect tax processes and procedures and move towards automation and digital transformation.

The research found that some tax professionals are embracing new technologies as part of their digital tax initiatives, with nearly a third (32%) stating that MTD is a key driver towards adopting digital tax technology. Opting for a complete tax compliance software platform will give companies access to features such as exception reporting, full data audit trails including manual adjustments, group and divisional reporting, as well as being ready for future digital tax requirements, such as corporation tax submissions.

Many companies are using MTD as a chance to move away from manual processes and the survey found a drop in the use of Excel for VAT returns for filing and maintaining records, decreasing from 28% to 22% (compared to a Thomson Reuters survey of November 2018) for filing returns, and from 34% to 26% for maintaining records.

In addition, 76% of accountants reported that their company processed VAT returns through an in-house tax department, with 77% reporting that they planned to file future VAT returns either in-house using professional software or via third parties. This would be a significant shift given that 56% purported to currently track VAT processes manually.

Organisational challenges

Whilst progress is being made by companies in their preparations for MTD, accountants did identity several clear organisational challenges that were making the task harder than it otherwise might be. Top of those concerns was “the digital maintenance of their records” (23%), followed by “finding suitable software for VAT return submissions” (24%) and concerns about “whether our software will be ready for the challenges” (17%).

Perhaps more concerning were the 25% that collectively responded with “Problems with board level buy-in to initiative” (2%), “Getting an understanding of how it will affect our organisation” (9%) and “Not a priority for our business – other projects to focus on” (9%).

While it’s clear that companies have accelerated their efforts to prepare for MTD, and recognise the benefits of digital tax technology, there are many still running the risk of not having their plans fully implemented and tested either now, or before the deferred deadline for “complex businesses”.

Keeping these projects moving forward will ensure companies benefit from the automation, reporting, cost savings and improved compliance that digital tax technologies offer rather than taking a crude “sticking plaster” approach, which will impact their interests on both a local and international scale.


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