With less than 6 months to go until the Making Tax Digital soft launch period ends, you would expect many companies to have tax solution in place or be in the final stages of implementation before they can begin filing.
A recent report created by ARKK 'The challenges of the tax function in 2021' revealed that this may not be the case as numerous organisations still appear to be unclear on MTD phase 2 requirements and haven't started looking for a tax solution.
Awareness of MTD phase 2 responsibilities
Phase 2, or digital linking, seems to be causing some confusion among tax professionals. In our survey conducted in October 2020, a full 6 months after the initial MTD deadline, roughly 1 in 2 tax professionals were completely aware of MTD phase 2 requirements. This means the remaining half have some level of ambiguity about the upcoming mandate. How can companies be ready for MTD phase 2, when almost half aren't sure what the requirements are?
Preparedness for the next phase of MTD
When it comes to how prepared firms are for the second phase of Making Tax Digital, it varies across companies. Some are fully prepared with solutions already in place that they have been filing with, others are still sourcing a suitable solution. Hopefully, as we draw closer to the deadline, businesses that haven't yet found a solution don't simply go for a quick fix but opt for a platform that offers full MTD compliance, process automation and even machine learning capabilities such as for:sight.
In terms of companies' preparedness:
- Nearly 40% of tax experts are fully prepared, either previously having internal VAT processes in place that are phase 2 compliant or having already sourced a solution and are actively using it for their VAT returns
- Just over 20% are considering their options but finding a suitable solution that integrates with your company and its IT infrastructure can take time
- Another 10% of tax experts haven't started looking for an MTD solution yet. There’s still time however they need to start investigating to ensure they meet the deadline
It's also interesting that our data found organisations with annual revenue of between £500 - £999 million were the most likely to not be aware of phase 2 requirements, presumably meaning they don't have a solution in place. Not being digital link complaint by April 2021 will mean that businesses aren't in a favourable position with HMRC and are unable to take advantage of the multiple benefits tax technology offers.
VAT is only the stepping stone on HMRC's MTD journey
We've mentioned numerous times that compliance with MTD simply meets the requirements but leveraging all that digital tax solutions have to offer can make your tax function more efficient.
VAT is the first tax that HMRC has decided to digitise, however, the consultation on Corporate Tax has recently taken place and HMRC are now seeking feedback. As more taxes become digitalised the need for a robust solution increases. Why not take this opportunity to give your tax department their time back and allow them to focus even more on value-add tasks.
If you’d like to learn more about the Making Tax Digital journey, download our 'The challenges of the tax function in 2021' report or get in touch with ARKK today.