The future of tax is coming. In many businesses tax remains the “forgotten child” of the finance function; often lagging behind other parts of the business in terms of technology investment. With the introduction of MTD and a wealth of Making Tax Digital software solutions available, we explore how HMRC is not only moving to a digital future themselves, but is kick-starting the whole industry on a long and prosperous tech journey with them.
Originally published for the Tax Transformation Summit 2018.
HMRC has ambitions to become “one of the most digitally advanced tax administrations in the world”. They have some ground to cover; some firms still submit paper returns, whereas in countries such as Spain SAF-T is underway, where submissions happen electronically every four days. HMRC’s ambition is admirable, and it’s our view at Arkk Solutions that Making Tax Digital should be embraced and treated as an important strategic initiative.Traditionally, many firms have a short-termist stance when it comes to investing in Tax technology. It’s easy to see why – not much has existed in the market, and the usability of these products is questionable at best. Accountants are good at accounting but not necessarily good at building software. Often, the outcome is a point solution with an expiry date.
That’s why, when Making Tax Digital for VAT creeps up on the agenda, API-only tools can seem an acceptable solution for many. They functionally work, are incredibly cheap, and sit on the end of the existing, manual process.
This might work initially, but as this market develops at pace, we are starting to see many organisations appreciate the benefit of taking a long-term view. Bridging software leaves gaps which will not tackle the changes we are set to see in the tax function of the future.
Compliance aside, the opportunities for value adds around operational efficiency, improved process management and cost savings from lower ongoing procurement, are too significant not to consider.
As a business, Arkk is continuing to take a fresh look at how tax teams complete VAT returns. One great example of this is the process of cleansing the AP/AR data that forms the basis for the VAT calculation.
Many tax teams spend hours (or even days) manually checking this, knowing they’ll find errors that they need to correct. We’ve dramatically improved this process by using machine learning to spot data that appears inconsistent.
This is one example where our clients see significant benefits and value added to their VAT process. But it doesn’t stop there; tax and MTD go beyond VAT alone. Truly future-facing firms understand the value of having a trusted partner with a strong roadmap – not just another provider with a point solution for Making Tax Digital software.
API-only software is a temporary fix, rather than a long-term play. By adopting a future proofed platform, you’re subscribing to an ethos that tax doesn’t have to be manual, painful and ugly – it can be beautiful.