The UK government's Making Tax Digital (MTD) initiative, part of the Finance Bill 2017, requires businesses with a turnover above the VAT threshold (currently £85,000) to keep digital records from April 2019 for VAT purposes. Some businesses with complex requirements have a six month deferral period. But a recent Thomson Reuters survey of UK tax professionals found that companies have not yet started implementation and are unsure of how to comply by the deadline.
- 70 per cent of the 146 tax and accounting professionals surveyed said they had developed plans, but not started implementation of MTD for VAT;
- 37 per cent of respondents said they are waiting until they hear more from HMRC about the revised October 2019 MTD for VAT deadline for “businesses with complex requirements”;
- 62 per cent of respondents admitted VAT processes are still tracked manually;
- 55 per cent of accountants said they use spreadsheets for storing VAT data;
- 23 per cent said they prefer other in-house software;
- 34 per cent said they will continue to use Excel to store digital records relating to VAT after a digital implementation, suggesting they are considering a “quick fix approach to MTD for VAT”.
IT and digital records greatest tax worry
MTD for VAT is HMRC’s latest step towards creating a digital relationship with businesses and become “the most digitally advanced tax administration in the world”. According to Thomson Reuters, nearly three-quarters of respondents (72 per cent) in the November 2018 survey stated that concerns about software and digital records maintenance are their greatest worries in preparing for MTD. It added: “The decision to delay implementation means many will miss out on the benefits digital tax reporting can bring. This could potentially lead to a greater risk of businesses needing to take a sticking plaster approach to meet the deadlines.”
Benefits of tax compliance software
There has been growing use of the HMRC portal to submit VAT returns: 80 per cent of survey respondents said they now use it, compared with just over half in summer 2018. Thomson Reuters commented in a statement on the survey results: “Increased use of the portal is positive, but it is clear that finance departments are unsure on the technological and process changes they need to make moving forward.”
According to Thomson Reuters, a complete tax compliance software platform gives 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.
Kim Hau, senior proposition manager for ONESOURCE Indirect Tax at Thomson Reuters said: “There is a real opportunity for tax accountants to embrace software that does much more than simply file a return. By accepting the inevitable move towards digital tax reporting, companies can use the new October 2019 deadline to implement indirect tax compliance software that will bring benefits such as automation, reporting, cost savings and improved compliance. It will mean businesses are ready for 2019, 2020 and other future tax changes, rather than taking a quick fix ‘sticking plaster’ approach.”
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