While Making Tax Digital (MTD) has been a focal point for the past couple of years, the 1st April deadline merely marks the start of changing how organisations report back on tax and VAT digitally.
To recap, the introduction of MTD is to allow the UK tax system to be as efficient, effective and straightforward as possible – and reduce the amount of tax lost to avoidable customer errors which is costing the Exchequer over £9 billion a year. For those businesses with a VAT turnover above the £85,000 threshold, a digital record is required with VAT returns submitted using MTD compatible software. In the first year, businesses will not be required to have these digital links between software programs which means HMRC will accept ‘copy and paste’. However, once this soft landing period ends in April or October 2020 (depending on when a company’s VAT period started), it will be a legal requirement to establish a digital link between software programs.
With the clock ticking, finance leaders are now recognising MTD as a real catalyst for reviewing their digital strategy. And we are not talking just about their finance systems but ensuring compliance with HMRC regulations too – especially considering many legacy systems are simply not supported.
Reviewing financial processes and identifying opportunities for greater efficiencies and effectiveness, for example, is a pre-requisite for the financial function as it looks to deliver MTD – as is document management which includes the storage, security and processing of data. And there are emerging technologies like Robotic Process Automation (RPA) for streamlining systems even further.
Tools like RPA can genuinely transform key financial processes for the better. Yet, as Director General of the CBI, Carolyn Fairburn, recently said during her keynote speech at Advanced World, the UK has been too slow to adopt technology. She referred to two types of business – the ‘ostrich’ and the ‘magpie’. According to her theory, ostriches have their heads in the sand when it comes to embracing new technologies within their business. Meanwhile magpies, who don’t necessarily have huge budgets, are quick to adopt proven ideas, from cloud computing through to automation.
Every business, regardless of its type, needs to adopt MTD so why not see this as an opportunity to help drive these emerging technologies forward? Here are just a few things that financial leaders can expect by putting MTD at the heart of their company’s digital strategy:
- Integration of finance and accounting software for a truly connected business and one that has access to real-time data
- Touchless, automated processes to improve the accuracy of financial data, reducing costly mistakes, and improve the speed in logging and accessing that data
- Elimination of mundane administrative processes, freeing up staff to focus on higher value tasks as well as upskill for the digital future
- Improved mobility, giving financial management professionals access to critical information from one platform (wherever they are) – saving time and money
- Enhanced security and lower IT costs that come with modern systems, moving businesses away from legacy technology that is no longer fit for purpose
- Compliance of regulations like MTD but also the General Data Protection Regulation (GDPR) thanks to many technology solutions designed with robust data protection in mind
- Adoption of the cloud, which is the backbone of most technologies – like RPA – to enhance the operation of a business by simplifying and joining up processes.
While the move to MTD has been viewed by some as arduous and time consuming, and merely another symptom of a tick box exercise, the benefits are clear. It will improve the way firms handle their financial reporting, enabling financiers to speed up the transition away from paper accounts and processes to a much more streamlined and digitised process.