The UK is Making Tax Digital; Tax Groups Should Consider Doing the Same

Two women in work aprons standing in front of their checkout computer in their flower shop. The woman in the foreground is showing her business partner information on a tablet. Light illuminates them from a window in the right side of the image, highlighting greenery and a string of purple flowers.

As they contemplate what the New Year may bring, VAT taxpayers in the UK might be excused for being less than enthusiastic about the new penalties for late filings and late payments that will take effect January 1, 2023. For many businesses, new sanctions will replace the Default Surcharge, which served as a combined late payment and late submission penalty, with a more complex system. It’s all part of the Making Tax Digital initiative, which requires digital record-keeping within software that’s compatible with the systems used by the UK revenue authority, HM Revenue and Customs.

It’s becoming increasingly clear that to stay in compliance with rapidly changing rules, regulations and digital reporting requirements like the UK’s, businesses will need to drive their own “making tax digital” initiatives.

As my colleague, Vertex VAT Director Peter Boerhof, points out in a recent ITR article, companies often assume that the tax functionality built into their ERP systems can manage their VAT requirements. But the reality is, it’s often not sophisticated enough for the job. “Consequently, businesses that are still using slow, laborious processes for invoicing, filing, and handling returns run the risk of audit failure,” Peter notes. “Non-compliance can cost businesses thousands, if not millions, on top of unpaid or overclaimed VAT.” Not to mention the risk of penalties, fines, and reputational damage.

A tax engine that integrates with the ERP platform can improve audit performance while streamlining the preparation of filings and relieving the burden of monitoring changes in tax legislation. It can also support digital sales by applying the indirect tax determination in real time.

In his article, Peter explains how Vertex helped one customer improve its indirect tax compliance with a solution that can upload and transfer data and connect all finance functions throughout multiple territories. The client was able to move away from a reliance on spreadsheets and custom-made, ad-hoc feeds with a more structured approach to VAT returns and in-built workflows that keep the company audit-ready at all times. Check it out – it’s a good example of how Vertex can help tax groups simplify and streamline global indirect tax compliance.

Please remember that Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information. The views and opinions expressed in Tax Matters are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.

Blog Author

Larry Mellon, Tax Directory, Vertex Inc

Larry Mellon

Tax Director, Chief Tax Office

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Larry Mellon is a Tax Director in the Chief Tax Office, where he is responsible for providing insights, thought leadership and customer-centric direction to Vertex functional groups, supporting the continued expansion of Vertex indirect tax solutions and overall enterprise strategy. He has over 30 years of experience in sales and use tax compliance, risk assessment, jurisdictional audits, administration and management, as well as VAT compliance. Larry joined Vertex in 2005 as a Sales and Income Tax Supervisor and has served as Tax Manager since 2012, where he has played a pivotal role in elevating and advancing the company’s tax management offerings.

Prior to joining Vertex, Larry served as a Senior Tax Accountant and Property Tax Manager at Foamex International, Inc., a polyurethane and advanced polymer foam product manufacturer and marketer. Mellon also held multiple roles at The Franklin Mint and is a member of the Institute of Professionals in Taxation (IPT).

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