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Transitioning to MTD: The best approach for big business

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Russell Gammon, chief solutions officer at Tax Systems, explores how larger enterprises and accounting consultancies can go beyond compliance and supercharge their VAT processes.

27th Apr 2022
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By now, all large businesses in the UK will have implemented something to ensure they are compliant with Making Tax Digital (MTD) for VAT. However, with the latest milestone passed on 1 April, now is a good time to look at the wider implications.

Looking beyond the spreadsheet

In the early days of MTD for VAT, many companies assessed the requirements and did the bare minimum to ensure compliance. This often made sense in light of other business priorities, such as Brexit and, more recently, Covid-19. 

However, this has meant that many companies still rely on Excel and similar software to support their MTD calculations without realising that this puts severe limitations on the process. Not only does this approach require constant manual updates with all the scope for human error that entails, it also puts compliance at risk and lacks seamless integration with other finance systems.

Instead, companies should evaluate the new generation of UK-specific VAT applications, which save time, integrate with other systems such as enterprise resource planning (ERP), and update automatically in line with regulations. Specialist VAT software will also reduce risk, increase accuracy and control while driving efficiency. This helps big companies avoid common issues such as time-consuming data formatting.

Delivering value outside basic requirements

It is also worth bearing in mind that new financial systems and VAT calculation tools can increasingly create value beyond meeting MTD obligations. Think of enhanced business intelligence through better data visibility or more complex calculations, such as partial exemption, where this new breed of systems could help you recover far more VAT. Indeed, in a survey we did of over 250 VAT professionals in the UK, most respondents believe dedicated partial exemption software could recover 1–5% additional VAT each period.

Having consistent access to large volumes of accurate data enables sharper insight into profit margins in different areas of your business and thus smarter decision-making, helping you identify gaps and analyse business performance. This data can also be elevated beyond the tax department where further value can be extracted.

Full stack versus best of breed

More recently, we have seen a shift in the mindset of many businesses when it comes to procuring technology. Previously, the view was often that the best approach was to use monolithic solution providers with a large solution portfolio. The view was that having connected technology outweighed the fact that the individual solutions wrapped up in the full stack were often not the best tools for the specific job.

Now, thanks to extensive cloud-based ecosystems, it is much easier to choose best-of-breed solutions, safe in the knowledge that they will work well with your other cloud applications. This means you can build the ecosystem you want, with the individual solutions you want, quickly and cost-effectively through application programming interfaces and integrations.

Where next for MTD?

As we know, MTD for VAT is the first cab off the rank in HMRC’s desire to become an advanced digital agency. MTD for income tax is currently ramping up and according to the current schedule, corporation tax will follow. Indeed, MTD for CT will potentially require much closer collaboration between VAT and CT processes, and data being shared between the processes will become the norm, rather than the exception. 

In short, organisations that are investing in technology for VAT now will find the future transitions across other taxes easier.

Furthermore, beyond HMRC, some anticipate the introduction of EU-wide regulations and standardisation towards an e-invoicing process. Having the right software ready will enable additional requirements to be considered seamlessly.

Clearly, big businesses can engage with MTD much more effectively using specialist software. This ensures the fast creation of accurate reports and calculations, while also driving smarter business decisions and future-proofing the enterprise against upcoming bumps in the road or legislative changes.

 

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By Hugo Fair
27th Apr 2022 19:11

"Furthermore, beyond HMRC, some anticipate the introduction of EU-wide regulations and standardisation towards an e-invoicing process. Having the right software ready will enable additional requirements to be considered seamlessly."

This all reads more like a Present List sent to Santa, than a realistic set of prognostications.

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Replying to Hugo Fair:
ghm
By TaxTeddy
28th Apr 2022 08:42

Agreed. I can't help but think of my early days in industry in the 90s when a major concern was the standardisation of CT rates across the EU. Still being discussed, I believe.

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