Digitalizing VAT: Challenges and Future Directions in HMRC’s System Overhaul

• Digitalisation of VAT has faced challenges and complexities, requiring more efforts to fully implement
• HMRC aims for real-time VAT reporting by 2030 to streamline tax processes, reduce fraud, and improve accuracy
• The first phase, Making Tax Digital for VAT, started in 2019 with mixed experiences from businesses
• Over 1.6 million businesses are using MTD for VAT, submitting over 11 million returns
• UK businesses support HMRC’s goal for real-time reporting but need a clear roadmap and sufficient preparation time
• Confusion exists in the UK about the transition timeline and requirements for VAT digitalisation
• Critics like Paul Beare and Russell Gammon express frustration over the slow progress and complexity of VAT digitalisation
• A National Audit Office report highlights that larger businesses comply better but HMRC struggles with legacy systems and data issues
• The report also criticizes the unrealistic initial timeframe and the negative impact of delays on the credibility and cost of MTD
• Change management rather than technology poses the main challenges since the inception of MTD for VAT
• There is potential for further progress if HMRC refocuses on VAT digitalisation efforts

Source: icaew.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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