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HMRC shifts from soft-landing to MTD enforcement for VAT

Here’s how this is an opportunity for tax teams.

It’s been over a year since the soft-landing period for Making Tax Digital (MTD) for VAT ended. Since then, and particularly over the past few months, anecdotal evidence points to the HMRC looking beyond claims of MTD compliance to actively reviewing processes.

This change in direction has come directly from the HMRC itself in the form of risk reviews and other periodically scheduled interventions, as well as through external auditors and internal control teams flagging weaknesses. In addition, the HMRC published Compliance checks: How to avoid penalties for Making Tax Digital for VAT on 31 May which explicitly suggests that they are moving toward a “hard-landing” approach for MTD failures.

As it stands today, many businesses are not fully MTD compliant, particularly large and complex organizations. Some of these organizations may be unconsciously uncompliant, not even knowing they would fail an audit.

If your organization has taken a copy and paste approach by patching together end-user computing tools that rely heavily on Excel, the HRMC’s shift to MTD enforcement intensifies the need to move beyond simple bridging software to a smart tax technology solution.

Moving beyond a superficial fix

With an up to 100% tax penalty on VAT owed for non-compliance, it’s time to move beyond a cursory approach for MTD. Tax teams reliant on spreadsheets for business-critical processes are exposing themselves to risk. Plus, copying and pasting is incredibly manual and time-consuming. Your time is much better spent analysing tax data and providing decision-making guidance to leadership.

But how do you go from sticking plaster to supercharging your tax function? It starts with a firm foundation rooted in smart tax technology, like ARKK's automation platform. This type of investment can optimise your VAT workflow by enabling you to:

• Seamlessly plug in data from any system or format
• Automate onerous manual processes,
• Eliminate known and unknown errors
• Collaborate in real-time with team members
• Access a full audit trail of actions
• Ensure compliance using a single source of truth

When evaluating a robust tax technology platform that offers real-time reporting, one of the most important factors is to build workflows that enhance what’s currently in place. Look for an expert tax technology provider – like ARKK -- that can create a bespoke solution tailored to your organization’s specific VAT needs.

With the ability to aggregate data from multiple sources, ensure data quality, calculate VAT obligations and submit returns to the HMRC, you can rest easy knowing requirements have been met and penalties have been avoided.

An opportunity to become future-ready

With steep penalties at stake, many organisations are beginning to see tax as a strategic value center that impacts the bottom line. And smart tax departments aren’t missing the opportunity.

There are numerous benefits that can be gained from a more robust tax technology solution that goes beyond just MTD compliance. Through the automation of repetitive tasks, in-built team collaboration, advanced reporting and machine learning functionality, tax teams can file more quickly and easily, and analyse data to unlock deep business insights.

With a comprehensive tax technology solution in place, compliance processes are standardised, freeing up time for tax professionals to focus on more value-added activities, like tax strategy. This type of technology enables tax data to be used across numerous disciplines and cloud-based solutions enable cross-functional collaboration like never before, cutting down on redundancies and increasing accuracy.

At the end of the day, transforming your tax processes is about much more than MTD compliance. It’s about becoming a forward-thinking, future-focused tax team. If your current software license is coming to term, now is a great time to review your processes and evaluate the tax technology options available to you. Smarter decision making and a more prominent seat at the table lie ahead.