Tax Systems Customer Conference October 2019 The Future of Tax - - PowerPoint PPT Presentation

Tax Systems Customer Conference

October 2019

The Future of Tax Automation – Preparing for T

• morrow T
• day

Andy Dancer – Chief T echnical Officer

Tax Systems Customer Conference – October 2019

3

Making Tax Digital

• What’s the driving force?
• What’s happening now?
• What’s coming next?

Other drivers for the same change

• Business Risk Review
• Efficiency, Cost Saving & Risk Reduction
• Complexity use cases

Agenda

WHAT SHOULD WE DO NOW?

About MTD

MTD

Making Tax Digital

Will increase the frequency of submissions Legislation & obligations increasing

NOW!

e.g.2017 finance bill was 665 new pages!

HMRC IS CLOSING THE TAX GAP

£35

BILLION

8.3% in 2006 5.6% in 2018

Need to demonstrate international transparency

NOW!

What’s the Driving Force?

The Tax Gap

BRAZIL ITALY RUSSIA

What’s the Driving Force?

Tax Digitisation around the World

Mandatory electronic invoicing Completely mandatory

• nline filing

“Digital First” strategy

Source: https://www.icaew.com/-/media/corporate/files/technical/information-technology/tech-faculty/digital-tax.ashx

7

HMRC “customers” fit into one of three buckets

Focus of HMRC resources

What’s the Driving Force?

Good Process & Accurate Filing IGNORE Not trying hard enough to comply FOCUS Trying to get it right, but some accidental errors

SHRINK

What’s happening now?

Making Tax Digital for VAT is now in full flow…

Manual calculations HMRC VAT portal Copy & paste Copy & Paste

The stages of MTD for VAT

Accounting software

1

Bridging Software

2

Digital Links

3

Other drivers for the same change

11

• Looks at:
• Business Landscape
• Systems and Delivery
• Governance
• Approach to Tax Compliance
• 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

Updated Scheme launched October 1st for the largest companies

Business Risk Review

12

This combination is the most common, but leads to an increased risk of mistakes and potential penalties

Efficiency, Cost Saving and Risk Reduction

Time T

• oling

Penalties

It takes far longer to do returns using spreadsheets than dedicated tooling Evidence suggests that 88% of spreadsheets have errors in them Dedicated tooling is not just faster and more efficient Crucially it also leads to lower risk and a potentially better BRR score

13

Four Drivers to Digitise

Resource reduction Regulation Risk Reduction Rewarding Roles

14

Need to prove the method is right, not just the answer

• MTD will mandate
• BRR strongly encourages
• Internal Governance agrees

There isn’t time to do it any other way

• Compliance will move from annual to

quarterly, then monthly and before too long real-time

• Without automation it will be impossible

to keep up

Why manual processes won’t work any more

Case Study

Our own VAT return

16

• A software provider with very simple

VAT requirements

• Except we have a VAT group
• Our existing “MTD” compliant

accounting software can’t handle it

• Which forced an otherwise digital

process into a manual one:

• Save out the

VAT data for each company

• Import in Excel
• Calculate the

VAT

• Input into HMRC’s website

Case Study

Efficiency, Cost Saving and Risk Reduction

17

• Introduced bridging software to ensure we are compliant with HMRC
• We now click a button to transfer our data by API, instead
• f rekeying 9 numbers into HMRC’s online portal

MTD requires a bridge from Excel to HMRC

STEP 1 – Compliance

COMPLIANT IMPROVED NEUTRAL NEUTRAL

Regulation Risk Reduction Rewarding Roles Resource Reduction

18

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

Digital Links and removal of spreadsheets

STEP 2 – Automation

COMPLIANT AHEAD OF TIME IMPROVED SIGNIFICANTLY TIME SAVING FOR FINANCE LESS MANUAL DATA CHECKING

Regulation Risk Reduction Rewarding Roles Resource Reduction

Business reaction to MTD

We are seeing two types of reaction

Want to address MTD for VAT & CT with one model

• Active plans in place for

VAT in 2019 and 2020

• Already looking to 2021 and how they

will address Corporation TAX LONGER TERM FOCUS > £100m

companies

A

< 30% of clients

Reacting to the immediate requirement

• f the compliance cycle
• Just in time approach
• Are not yet looking at

VAT Digital Link or CT SHORT

• TERM

FOCUS < £100m

companies

B

> 70% of clients

20

Thinking two steps ahead

Plot the path and take it step-by-step PROPER PRIOR PLANNING PREVENTS P**S POOR PERFORMANCE

• Plan ahead of time, even if

you don’t act ahead of time

• Ensure that you select a

provider that will offer tooling for every stage of the journey so you don’t end up in a technology cul-de-sac

7Ps

Accounting software

Digital Links

Compliance Engines Regulator Data Lake

Corporation Tax VAT Stat Accounts

Other business processes

What does “good” look like?

Digital Links Digital Links Digital Links

FUTURE PROOF SOLUTIONS

Our view on compliance software

The minimum businesses need in place

Enable businesses to stay well ahead of HMRC’s MTD deadlines

1

Migrate a step at a time with minimal system & process change

2

Scale through the whole MTD process (inc Corp Tax)

3

End to end digital process Simple Audited Cost effective

T: 01784 777 700 E: enquiries@taxsystems.com W: www.taxsystems.com A: Magna House, 18-32 London Road, Staines-upon-Thames TW18 4BP

Thank you

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

4

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

Capital allowances

V19.0 – Finance Act 2019

5

Carried forward loss restriction – relevant profits definition

V19.0 – Finance Act 2019

6

Carried forward loss restriction – group relief for carried forward loss claims

V19.0 – Finance Act 2019

7

Accounting for leases

V19.0 – Finance Act 2019

8

• 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

Non-resident disposals of UK property

V19.0 – Finance Act 2019

9

• 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

Relief on goodwill and certain other intangible assets

V19.0 – Finance Act 2019

10

• Part 2A introduced to CAA2001
• Expenditure incurred on or after 29 October 2018
• Straight-line WDA at 2% over 50 years

Structures and buildings allowances

V19.0 – SI 2019/1087

11

CT600 2019 and XBRL taxonomy

V19.0 – 2019 Tax Returns

12

• SA700 = no new boxes
• SA800 = disguised remuneration (loan charge)

SA700 2019 and SA800 2019

V19.0 – 2019 Tax Returns

13

REITs HMRC Financial Statements T

• ol

V19.0 – 2019 Tax Returns

Administration Recap

Carried forward loss restriction and Corporate interest restriction

15

Group allowance allocation statement Interest restriction return

Carried forward loss restriction

What are we referring to?

Corporate interest restriction

16

“Nominated company”

• Prepared but not submitted
• Signed by every group company
• Persists across periods
• s269ZS

References are to CTA 2010 “Reporting company”

• Submitted to HMRC
• Signed by >50% of group companies
• Persists across periods
• Sch 7A para 1

References are to TIOPA 2010

Carried forward loss restriction

Who is responsible?

Corporate interest restriction

17

Group allowance allocation statement

• Attach to company tax return
• Due within 12 months of filing date
• Optional HMRC template
• Revised return possible
• s269ZT

Every company must state their deductions allowance in company tax return Interest restriction return

• Upload to the HMRC portal
• Due within 12 months of return period
• Optional HMRC template
• Revised return possible
• Sch 7A para 7

Abbreviated returns

Carried forward loss restriction

Submission

Corporate interest restriction

18

Definition of a group?

• S269ZZB – similar to group relief

Is a single company included?

• No

Do you need to list all companies?

• No, only those with an allocation

Are you allowed no deductions allowance?

• No!

Definition of a group?

• S473 – IFRS consolidation (worldwide)

Is a single company included?

• Yes

Do you need to list all companies?

• Yes, all UK group companies

Ultimate parent changes?

• T

wo group files should be prepared

Carried forward loss restriction

Common questions

Corporate interest restriction

Looking ahead

Future legislative changes

20

Non-resident UK property income brought into corporation tax

Finance Act 2019

21

Corporate capital loss restriction

Draft clauses for Finance Bill 2019-20

22

Corporation tax changes already enacted:

• Rate to reduce from 19% to 17% from 1 April 2020
• AIA to reduce from £1m back down to £200,000 from 1 January 2021
• Rate of the bank levy continues to fall

Other corporation tax news

And finally…

23

R&D expenditure

• Government industrial strategy 2.4% of

GDP on R&D

• SME relief more than doubled in 2018-19
• R&D Digital Form launched
• New cap on the SME payable credit

Other corporation tax news

And finally…

T: 01784 777 700 E: enquiries@taxsystems.com W: www.taxsystems.com A: Magna House, 18-32 London Road, Staines-upon-Thames TW18 4BP

Thank you

Michael Cameron MTD Customer Readiness and External Stakeholder Team

MTD Update Tax Systems Conference

23 October 2019

Gherman Titov

What I’ll Cover

▪ The Story so far for VAT MTD ▪ Looking at the Numbers ▪ What’s Next ▪ MTD Other Taxes ▪ Questions

Stagger Total mandated Sign ups % Monthly 45,800 41,711 91% Stagger 1 (7th August) 495,000 414,135 84% Stagger 2 (7th September) 314,000 248,323 79% Stagger 3 (7th October) 295,000 221,995 75% Annual 9,000 2,055 22% MTD VAT Sign up Figures

April Group 81% October Group 35% Total 79% % of mandated population signed up

MTD Numbers

@ 18 Oct 2019

Value of VAT Payments processed by MTD system - £15,663,785,271.28

• 475 commercially available products
• 174 are bridging (file only) products
• 14 free products available for customers with the simplest tax affairs
• 11 products that meet the needs of customers with accessibility

needs. HMRC is continuing to work with the industry to increase the number

• f accessible products.

HMRC has published its software choices page on Gov.UK, this provides customers with the full list of available products.

MTD Numbers

A quick canter through the VAT MTD journey with commercial providers.

7

Deferred customers – 1 October 2019

▪Trusts ▪‘Not for profit’ organisations that are not set up as a company ▪VAT divisions ▪VAT groups ▪Public sector entities ▪Local authorities ▪Public corporations ▪Traders based overseas ▪Payments on account ▪Annual accounting scheme users

November 1-7 End of submission period for September 2019 Direct Debit payers must wait till their payment cycle completes – sign up not possible Not a DD payer? Allow at least 24 hours after submitting before sign up November 8-14 Direct Debit Payment Period for September 2019 Direct Debit payers must wait till their payment cycle completes - 5 working days after filing deadline Not a DD payer? Allow at least 24 hours after submitting before sign up

November 15 - 27 Sign up is

• pen to all

payment types

November 28 – 30 Sign up for Direct Debit Payers closes 28 November Not a DD Payer? Sign up at least 72 hours before

filing December 1-7 Submit October 2019 return digitally via software

Monthly filer – deferred – first mandated MTD return

I want to submit the October 2019 return via MTD software

HMRC recommends you complete sign up in the green zone for a smooth transition. Signing up in the needs greater care or may not be possible

MTD Deadline

Sign up not possible for DD payers Only sign up for MTD VAT in October if you file Jul-Sep 19 return early and don’t pay via Direct Debit You must still allow at least 24 hours after filing before sign up File Jul-Sep 19 return by 7 November Direct Debit payers must wait till their payment cycle completes - 5 working days after filing deadline Not a DD payer? Allow at least 24 hours after filing before sign up

If you submit the Oct- Jun 19 return early make sure you’ve signed up in good time DD payers must allow 7 working days after signing up before filing. Sign up for Direct Debit Payers closes 30 Jan Not a DD Payer? Sign up at least 72 hours before filing If you submit the Oct- Dec19 return early make sure you’ve signed up in good time DD payers must allow 7 working days after signing up before filing. Sign up for Direct Debit Payers closes 30 Jan Not a DD Payer? Sign up at least 72 hours before filing

Quarterly filer – stagger 1 – deferred – first mandated MTD return

I need to sign up in time to submit the Oct-Dec 2019 return via MTD compliant software

October November December January

HMRC recommends you complete sign up in the green zone for a smooth transition. Signing up in the needs greater care or may not be possible

15th 23rd

MTD Deadline

What’s Next

▪ Non Mandated VAT Customers

Full Migration

» Non Mandated VAT Customers

Old VAT System New VAT System VAT MTD NON MTD

» Mandated VAT Customers

Full Migration

• Method of Submission

Manual (Exempt from Online) Via Government Gateway Via MTD Software XML?

• Represented Customers

Agents Services Account Linked Agency Credentials

• Direct Debit Customers

Email Address

• Continue to Pilot for small group of volunteers
• Still a small number of software products
• Plans to Increase functionality of the pilot
• Plans to Increase the number of products
• Information about joining found on Gov.UK

Income Tax

• MTD for CT is still part of our digital strategy
• Promised proposed changes before April 2020
• A Personal View of what might happen with CT

Corporation Tax

MTD Update

Thank You & Any Questions?

Michael Cameron MTD Customer Readiness and External Stakeholder Team

Tax Systems Customer Conference

October 2019

Taking the Complexity out of VAT

Carl Everard – Account Manager

Tax Systems Customer Conference – October 2019

3

Manual calculations HMRC VAT portal Copy & paste Copy & paste

Typical process pre MTD

Accounting software

Copy & paste Accounting software

Staying compliant with Tax Systems

Meets the soft landing requirements: 1 April 2019

VAT RETURN Completed & submitted automatically

• No change to existing systems or processes
• Allows continued use of existing spreadsheets
• Easy first step to MTD Compliance
• Easy to use dashboard - reporting obligations past and present

Digital link HMRC API

5

Risks

Customer insights

ERRORS 88%

• f spreadsheets contain

errors and broken macros

20%

• f >£1bn businesses lack

confidence in their tax figures

40%

• ur customers suggest

that number is higher

1/3

• f mid-sized businesses believe

their taxes are not accurate Auditors highlight spreadsheets as the single biggest cause of non-compliance. Key person dependency & spreadsheet management Sheets evolve over years, when team members leave this presents difficulties Version control

6

Efficiency

Customer insights

Collating, identifying and inputting data can take up huge amounts of time.

75%

• f effort is related to data collection/management

56%

• f tax professionals spend
• ver 10 days on returns FOUR

Many finance teams spend four months a year on VAT

68%

• f organisations plan to use technology to reduce compliance workloads

and make better use of skilled in-house resources.

8

Automated calculations Accounting software

VAT Return process with AlphaVAT

VAT RETURN Completed & submitted automatically

• Removes the need for spreadsheets.
• Simplifies complex calculations such as group consolidations and partial exemption

(Standard and Special Method)

Demonstration

11

How we can help

AlphaVAT - recap

1

CALCULATION ENGINE

2

DATA MANAGEMENT

3

REGULATORY UPDATES

4

AUTOMATION

5

CONTROL Removing the need of spreadsheets Reduce the amount of data cleansing required, providing more time for reviewing Keeps up with regulatory change via inbuilt tax logic Increases efficiency by automating VAT calculations T

• tal control over the preparation, calculation and

management of your VAT Return

T: 01784 777 700 E: enquiries@taxsystems.com W: www.taxsystems.com A: Magna House, 18-32 London Road, Staines-upon-Thames TW18 4BP

Thank you