Webinar overview: The future of finance - MTD phase 2 and beyond

With an imminent end to the MTD soft landing period, we hosted a webinar covering everything you need to know about MTD phase 2 obligations and how to use this as an opportunity for wider digital financial transformation.

If you'd like to view our most recent webinar 'The future of finance: MTD phase 2 and beyond', it's available here on-demand, or you can read ARKK's webinar overview for all the key takeaways.

The webinar attendees were as follows:

• Christian Lacey-Brennan (HMRC)- Head of Parliamentary Handling and Senior Stakeholder Engagement​
• Laurence Kiddle (ARKK) - Board Advisor
• Richard Metcalfe (ARKK) - CEO and Co-founder

HMRC's journey to complete digital taxation

From the outset, HMRC has put forward a very ambitious plan to become the most digitally advanced tax administration in the world. The MTD journey plays a huge role in progressing UK taxation to a similar level, or beyond, of other countries. By 2018 over 100 economies had shifted from filing taxes manually and paying in-person to electronic payments and the UK must keep pace.

Some of the benefits Christian mentioned that HMRC will gain from MTD will be an improved service to businesses and also helping to close the tax gap, much of which is caused by common mistakes from companies through errors in record keeping and reliance on outdated systems.

Although most organisations seemed prepared for the April 1st deadline, there still seems to be some uncertainty surrounding MTD. The results from a poll conducted during our webinar found that 67% of attendees were comfortable with the upcoming MTD obligations around digital links, however, 33% are uncomfortable with it and none were very comfortable. With such little time until the MTD phase 2 official begins, we would expect a higher percentage of businesses to be in the ‘comfortable’ segment. If you're in any way unsure about the digital link obligations, please check out our digital links eBook.

Full automation, full benefit

HMRC's research found that companies that had fully automated, meaning they had a fully MTD phase 2 compliant solution in place, noticed numerous benefits such as:

• A reduction in input errors
• An increase in return accuracy
• Fewer miscalculation errors
• The ability to amend errors more quickly

That being said, there still seem to be a large portion of businesses that haven't invested in a compliant solution yet. Our poll results revealed that

66% of webinar attendees have either bought a simple filing solution or haven't solved it yet with less than a month to go until the soft-landing period ends.

The latest MTD roadmap

Christian presented an updated roadmap of the MTD journey. Although the VAT soft landing period may be ending there are many other milestones along this journey and it will take several years to complete. It's worth noting that Corporation Tax won't be introduced until 2026, at the earliest, but why not take the opportunity now to futureproof your finance function?

• March 2021 –Consultation on the detail of introducing Making Tax Digital to incorporated businesses with Corporate Tax obligations closes.
• April 2021 - The pilot service for Income Tax will increase the number of businesses and landlords eligible to sign up.
• April 2021 -  Businesses required to have digital links between software programs until their first VAT Return period starting on or after 1 April 2021.
• April 2022 -All remaining VAT registered businesses must sign up to MTD (affecting accounting periods that start on or after 1 April 2022) 
• April 2023 - All unincorporated (self-employed) businesses and landlords with annual business or property income above £10,000 must sign up to MTD (affecting accounting periods that start, or deemed to start for tax purposes, on or after 6^th April 2023). 
• 2026 – Earliest date MTD for CT will be introduced.

Short vs long term

Following Christian, Laurence explained how the first step of corporate digital transformation is to get MTD done correctly. Once this is in place, finance can then move onto wider benefits. The idea of MTD, and wider transformation, is to get a process to work digitally and make it as efficient as possible.

Many companies are somewhat unaware of the flaws that exist within their current processes, instead choosing to ignore them as peeping under the hood could open a can of worms. This approach may work for now but it's more of a 'sticking plaster' approach than a long-term strategy.

Laurence advised that organisations should instead assess where there may be risk within finance processes and investigate how software can help to reduce it. An example being complex Excel sheets with a myriad of calculations. Maintaining the accuracy of these documents is difficult and implementing a flexible digital solution can help to remove some of the onerous tasks.

Using AI functionality to flag anomalies

Last but not least, Richard quickly showcased the benefits and some of the machine learning capabilities within for:sight. This highlighted how tax and finance teams can use the Consistency Checker to flag anomalous data to review.

For more information on for:sight click here and if you'd like to speak to a member of our team about your digital transformation journey, please get in touch.