Top 4 considerations for a successful MTD for VAT implementation
The final deadline to be ready for HMRC’s Making Tax Digital (MTD) for VAT is rapidly approaching in April 2021.
Perhaps you are only looking to comply by updating processes and digitalising the transactions needed that add up to make your UK VAT returns. However, many companies are choosing to take a longer-term view and realise that this is only the start of HMRC’s aspirations for digital tax reporting in the UK, with other tax categories set to follow such as corporation and personal tax.
Indirect tax is becoming increasingly important around the world with authorities demanding greater transparency, and technology is playing a key role in helping them capture data, improve processes, and identify tax evasion.
All these changes mean that businesses need to think in the long-term about the technology choices they make. Many are choosing to get the foundations in place that will ensure their business is ready for the future of digital tax reporting in the UK as well as all other major tax jurisdictions around the world, which are moving in the same direction and, in some cases, are already further ahead than the UK.
By implementing a tax technology platform such as Thomson Reuters ONESOURCE Indirect Tax Compliance, organisations can meet the immediate HMRC MTD for VAT requirements and reap additional benefits such as streamlining the tax compliance process with real-time rates and rules, customisable tools, and powerful data reconciliation, adjustment, and reporting capabilities.
Making a success of MTD for VAT and digital tax reporting in general is not just about choosing the right software and ease of use. Once you have chosen a package that perfectly meets your needs, it still has to be implemented. There are a number of factors that can have a real and lasting impact not only in terms of how well the project goes, but also in the business’s attitude towards and understanding of tax across its operations.
Below are four areas often overlooked. If you are in the process of kick-starting your MTD for VAT preparations, think about each and whether you have them covered in your organisation and how you can make them part of your project.
1. Build multi-disciplinary teams
Making indirect tax a success is a multi-disciplinary affair from accounts receivable and payable to legal, compliance, sales, and IT.
Think about it – wherever a transaction relevant for a VAT return is completed, all of those teams had some degree of role to play. Therefore, building a team of champions and senior sponsors across various departments will help the project be seen as a priority and keep it from stalling. It will also mean that there are fewer “unexpected surprises” and you can close the big risks and systemic problems such as excessive copy-paste, manual system overrides, and spreadsheet dependencies. These are all frowned upon in terms of the MTD for VAT requirements, and systemic issues may invite further investigation of questionable returns.
2. Coordinate communications
Work with HR and internal communications team members to build and spread awareness across the business about MTD for VAT. It’s not enough to tell people it is a requirement; you must explain the benefits to the business and why everybody has a role to play where they handle the business’s transactions. When you go live, you need everybody on board to make it a success.
3. Get your data right
Regardless of the software you use to file MTD for VAT returns, the data you feed into it has to be right; otherwise it will be a case of garbage in, garbage out. Part of your MTD for VAT project should be considering whether your finance coding is accurate enough to meet the new requirements. Consolidations and reconciliation processes that may have previously taken place outside the finance system on spreadsheets risk breaking the digital links for your MTD compliant VAT returns.
Accurate and automated coding for tax and accounting is key to the success of any MTD for VAT implementation. It underpins all the calculations, so things need to be right in your upstream finance systems. In some businesses, MTD for VAT may require achieving greater coding granularity, and that will mean creation of new tax codes and accounts in the finance systems – so please be aware that not all changes will be convenient for all stakeholders.
4. Focus on training
Remote working and dispersed teams are now more common than ever before. That is going to impact how you train colleagues and provide support, not just for the tax professionals, but others in the finance teams. You have to ensure that teams posting transactions that impact indirect tax, such as employee expense filings, credit note adjustments, prompt payment discounts, banking fees, or currency fluctuations, are also well trained.
Aim to train the whole tax team on the full end-to-end MTD for VAT processes. Having that understanding will reduce manual interventions and educate teams on why processes need to be followed. Additionally, make sure they have access to online resources that can help them be their own self-starting trouble shooters – after all, remote working means it is harder to simply lean over and ask a colleague.
View MTD for VAT as the first step on your digital tax reporting journey. With ONESOURCE Indirect Tax Compliance as your tax technology platform, you will not only meet the requirements but also gain a better understanding of tax in your organisation, improve efficiency, and be ready for the worldwide move to digital tax reporting.
Contact us today for a demo of our ONESOURCE Indirect Tax Compliance solution for MTD.
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UK MTD: Future-Proofing Tax
As you make the necessary changes to achieve MTD compliance, it is worth considering the growing impact on your tax teams of similar reporting requirements in other jurisdictions. Watch the pre-recorded webinar to know how you can gain the most out of this structural change.