In the latter half of 2018, Arkk began meeting with both clients and prospects alike to discuss their new requirements for HMRC’s Making Tax Digital for VAT mandate. Hundreds of meetings later, across businesses of different sectors and sizes, we’ve heard many unique challenges faced by Indirect Tax Managers. Our tax expert Tom Aspinall takes a look at these questions in our latest MTD series to tackle the top issues faced by Tax teams in the run-up to the deadline.

Missed the first blog? You can read it here.

Challenge Two: ‘Does my job become less important with the arrival of automation and Tax Software?’

A 2018 Economist report concluded that nearly half of jobs in the Western World are vulnerable to automation; 47% could be completed by machines “over the next decade or two”.

Some of the best financial reporting solutions will incorporate Machine Learning and there are elements of this that can help make an Indirect Tax Manager’s job much more efficient. But this isn’t a case of replacing a human job, rather reducing time spent on less cerebral tasks to free up resources for more valuable work. Making Tax Digital is an opportunity to produce better quality work, rather than a digital threat. VAT rules will continue to be very involved, particularly around adjustments (PX, Goods Schemes etc.) and this remains far too complex to be ‘taken over by the robots’.

Challenge Three: ‘HMRC has mandated Making Tax Digital so compliance is paramount. This means choosing one of the Big 4, surely?’

Many FTSE 350 companies will use one of the Big 4 as their auditors. When speaking with Tax teams at Arkk, we’ve often heard – “we go to the Big 4 for all our Tax work already”.  

If MTD is seen purely from a compliance angle, the ‘safety first’ argument can be a compelling one.

financial reporting solutions for Making Tax Digital

HMRC has a list of approved MTD software providers (both live and in development). However, the variation between what each provider offers is far and wide. Perception aside, there is nothing intrinsically ‘safer’ about MTD software from the Big 4 than other providers. Given the ever increasing pressure for audit firms to split, or at least be more independent, most Tax teams do not want to then rotate their auditors and have to drop them as suppliers.

As mentioned above, Tax teams are also increasingly looking beyond compliance as the only factor in the equation. We’ve already said MTD presents an opportunity to fundamentally improve processes and quality of work. Compliance is vital, but it’s a tick box feature and not the exciting carrot an investment requires.

Safety for Tax teams also relates to the level of trust between them and their chosen MTD solution provider. Can the supplier meet their unique needs and requirements in the short and long term? Consider;

  • Multiple ERP systems (some antiquated, some brand new),
  • Thousands of rows of raw data,
  • Complex adjustments,
  • Lots of different teams around the world all requiring access,
  • Reporting into different countries,
  • Future Corporation Tax requirements looming,
  • EC Sales lists.

These are all elements that can make each company’s requirements uniquely challenging.

A financial reporting specialist can present significant advantages to Tax teams.

A specialist should have a strategic product roadmap and ensure their solution can adapt to ever-changing legislative and business requirements. For example, API based MTD solutions are often simple bolt-ons, providing bridging software or ‘stepping stone’ solutions. They are short term.

The Indirect Tax Manager’s we have spoken to have been well advised to conduct research to see whether the software they’re looking at is simply a legacy kit modified to cover MTD. At Arkk we have been developing a more holistic process management platform from scratch. Making Tax Digital for VAT is the start of our ongoing journey that will include; Corporation Tax, EC Sales, ESEF and much more. MTD software shouldn’t exist in isolation. There is far more to the Tax / Finance puzzle that can be solved through a Process Management Platform.

Tax managers conducting due-diligence are also advised to factor in the financial reporting supplier’s commitment to future investment in the solution.  Provision of a transparent and clear roadmap of their MTD platform that has parity with the business’ unique needs is always a good start, but is the supplier prioritising MTD or is it merely an auxiliary add-on to their priority business model?

There is no magic bullet software solution for all companies. Ultimately, there will be different suppliers more suited to certain companies and teams. The key is in the research, planning, and to not compartmentalise MTD… and of course not to dive straight in with the first supplier!

Check back next week when we’ll cover more challenges (and how to solve them!) including what how to overcome the pains of implementation and how to prepare for HMRC’s future requirements. In the meantime, if you work in Tax and this resonates with you, please get in touch with Arkk Solutions.

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