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UK MTD – VAT landmine for large taxpayers


UK MTD – VAT landmine for large taxpayers

The UK’s 2019 Making Tax Digital (‘MTD’) proposal, to require all business to store and report digital VAT return data, has largely been portrayed as targeting small/micro businesses. The aim of MTD to improve accuracy of submissions, and reduce fraud opportunities.

However, MTD includes a requirement for a complete digital journey for data that will catch-out most large and enterprise-sized businesses.  Current, widely-used manual consolidations and submissions will be prohibited, putting most large tax payers at risk of censure and fines.

Slaying the last manual mile – VAT data transfer must be digital

Currently businesses with multiple ERPs and/or members of VAT groups are usually unable to submit their UK data via an automated upload because it first requires a manual Excel consolidation of numbers.  The combined VAT return data is then typically keyed in each reporting period by the taxpayer at HMRC’s web portal.

Under the MTD proposals this will be barred because it is not a complete and secure digital journey for the data. The requirement will be to submit VAT information only via API’s (Application Programming Interface – a tool/protocol which enables the exchange of data between software, typically over the internet).

For companies with the manual Excel consolidation requirement, this would require the spreadsheet(s) to be API enabled to access HMRC APIs and report data to HMRC systems. Alternatively, bridging software, such as a VAT reporting tool, could be used to transfer data from the consolidating spreadsheet(s) to HMRC.  A good tool could also allow for auditable adjustments to be processed without undermining the digital journey.

April 2018 pilot

HMRC is running a pilot for the programme from April 2018, and will be looking to work with large companies on this challenge.

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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.