Tax Systems Customer Conference October 2019
The Future of Tax Automation – Preparing for T omorrow T oday Andy Dancer – Chief T echnical Officer Tax Systems Customer Conference – October 2019
Agenda Making Tax Digital Other drivers for the same change • What’s the driving force? • Business Risk Review What’s happening now? Efficiency, Cost Saving & Risk Reduction • • What’s coming next? Complexity use cases • • WHAT SHOULD WE DO NOW? 3
About MTD
What’s the Driving Force? The Tax Gap Legislation e.g.2017 finance bill HMRC IS CLOSING NOW! & obligations THE TAX GAP was 665 new pages! increasing 8.3% in 2006 Need to demonstrate 5.6% in 2018 NOW! international transparency £35 BILLION Will increase the MTD frequency of submissions Making Tax Digital
What’s the Driving Force? Tax Digitisation around the World BRAZIL ITALY RUSSIA Mandatory Completely “Digital First” electronic mandatory strategy invoicing online filing Source: https://www.icaew.com/-/media/corporate/files/technical/information-technology/tech-faculty/digital-tax.ashx
What’s the Driving Force? Focus of HMRC resources HMRC “customers” fit into one of three buckets Good Process & Trying to get it right, but Not trying hard enough Accurate Filing some accidental errors to comply IGNORE FOCUS SHRINK 7
What’s happening now? Making Tax Digital for VAT is now in full flow…
The stages of MTD for VAT Accounting HMRC 2 1 software VAT portal Copy & Paste Manual Copy & paste calculations 3 Bridging Software Digital Links
Other drivers for the same change
Business Risk Review Updated Scheme launched October 1st for the largest companies • Looks at: Business Landscape o Systems and Delivery o Governance o Approach to Tax Compliance o Having, and being able to evidence having, tried and tested automated systems are • significant factors in bringing down the risk score • A lower score means more trust and less audits 11
Efficiency, Cost Saving and Risk Reduction It takes far longer to do returns using Dedicated tooling is not just faster and Penalties spreadsheets than dedicated tooling more efficient Evidence suggests that 88% of Crucially it also leads to lower risk spreadsheets have errors in them and a potentially better BRR score This combination is the most common, but leads to an increased risk of mistakes and potential penalties Time T ooling 12
Four Drivers to Digitise Resource Regulation reduction Risk Rewarding Reduction Roles 13
Why manual processes won’t work any more Need to prove the method is right, There isn’t time to do it any other way not just the answer • Compliance will move from annual to MTD will mandate quarterly, then monthly and before too • long real-time BRR strongly encourages • • Without automation it will be impossible Internal Governance agrees • to keep up 14
Case Study Our own VAT return
Efficiency, Cost Saving and Risk Reduction Case Study • A software provider with very simple • Which forced an otherwise digital VAT requirements process into a manual one: Except we have a VAT group Save out the VAT data for each company • o Import in Excel Our existing “MTD” compliant • o accounting software can’t handle it Calculate the VAT o Input into HMRC’s website o 16
STEP 1 – Compliance MTD requires a bridge from Excel to HMRC • Introduced bridging software to ensure we are compliant with HMRC • We now click a button to transfer our data by API, instead of rekeying 9 numbers into HMRC’s online portal Resource Regulation Risk Reduction Rewarding Roles Reduction COMPLIANT IMPROVED NEUTRAL NEUTRAL 17
STEP 2 – Automation Digital Links and removal of spreadsheets We chose to implement the next two steps in one go: • Digital Links Removal of manual steps in the calculation • We did that by implementing a VAT Calculation Tool o Resource Regulation Risk Reduction Rewarding Roles Reduction COMPLIANT IMPROVED TIME SAVING LESS MANUAL AHEAD OF TIME SIGNIFICANTLY FOR FINANCE DATA CHECKING 18
Business reaction to MTD We are seeing two types of reaction LONGER TERM SHORT -TERM A B > £100m < £100m FOCUS FOCUS companies companies Want to address MTD for Reacting to the immediate requirement VAT & CT with one model of the compliance cycle Active plans in place for VAT in • Just in time approach • 2019 and 2020 • Are not yet looking at • Already looking to 2021 and how they VAT Digital Link or CT will address Corporation TAX < 30% of clients > 70% of clients
Thinking two steps ahead Plot the path and 7P s take it step-by-step P ROPER Plan ahead of time, even if • you don’t act ahead of time P RIOR • Ensure that you select a P LANNING provider that will offer P REVENTS tooling for every stage of P **S the journey so you don’t P OOR end up in a technology cul-de-sac P ERFORMANCE 20
What does “good” look like? Accounting Compliance Data Lake Regulator software Engines Corporation Tax VAT Digital Links Digital Links Digital Links Stat Accounts Digital Links Other business processes
Our view on compliance software The minimum businesses need in place FUTURE PROOF SOLUTIONS 1 2 3 Enable businesses to stay Migrate a step at a time Scale through the well ahead of HMRC’s with minimal system & whole MTD process MTD deadlines process change (inc Corp Tax) Cost Simple Audited End to end digital process effective
Thank you T: 01784 777 700 E: enquiries@taxsystems.com W: www.taxsystems.com A: Magna House, 18-32 London Road, Staines-upon-Thames TW18 4BP
Tax Systems Customer Conference October 2019
Finance Act 2019 and beyond Michal Szablinski – Tax Content Developer Robin Ogilvie – UK Head of Tax Development Tax Systems Customer Conference – October 2019
V19.0 Alphatax Finance Act 2019 and tax returns
V19.0 – Finance Act 2019 Capital allowances AIA increase to £1m from 1 January 2019 Special rate pool reduction to 6% from 1 April 2019 Energy saving PMAs and tax credits abolished from 1 April 2020 Electric vehicle charge points 100% FYAs extended to 2023 4
V19.0 – Finance Act 2019 Carried forward loss restriction – relevant profits definition 5
V19.0 – Finance Act 2019 Carried forward loss restriction – group relief for carried forward loss claims 6
V19.0 – Finance Act 2019 Accounting for leases 7
V19.0 – Finance Act 2019 Non-resident disposals of UK property • Charged to corporation tax from 6 April 2019 Direct disposal = land and buildings • • Indirect disposals = shares in a “property rich” entity Rebasing to April 2015 or April 2019 • • Compliance requirements • I day accounting period 8
V19.0 – Finance Act 2019 Relief on goodwill and certain other intangible assets • Goodwill and some customer related intangible assets acquired on or after 1 April 2019 Straight-line deduction of 6.5% • • Debits restriction when goodwill > 6 x qualifying IP assets 9
V19.0 – SI 2019/1087 Structures and buildings allowances • Part 2A introduced to CAA2001 Expenditure incurred on or after 29 October 2018 • • Straight-line WDA at 2% over 50 years 10
V19.0 – 2019 Tax Returns CT600 2019 and XBRL taxonomy 11
V19.0 – 2019 Tax Returns SA700 2019 and SA800 2019 • SA700 = no new boxes SA800 = disguised remuneration (loan charge) • 12
V19.0 – 2019 Tax Returns REITs HMRC Financial Statements T ool 13
Administration Recap Carried forward loss restriction and Corporate interest restriction
What are we referring to? Carried forward loss restriction Corporate interest restriction Group allowance allocation statement Interest restriction return 15
Who is responsible? Carried forward loss restriction Corporate interest restriction “Nominated company” “Reporting company” Prepared but not submitted Submitted to HMRC • • • Signed by every group company • Signed by >50% of group companies Persists across periods Persists across periods • • • s269ZS • Sch 7A para 1 References are to CTA 2010 References are to TIOPA 2010 16
Submission Carried forward loss restriction Corporate interest restriction Group allowance allocation statement Interest restriction return Attach to company tax return Upload to the HMRC portal • • • Due within 12 months of filing date • Due within 12 months of return period Optional HMRC template Optional HMRC template • • • Revised return possible • Revised return possible • s269ZT • Sch 7A para 7 Every company must state their deductions Abbreviated returns allowance in company tax return 17
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