Why it’s time for tax transformation

It is fair to say the tax depart­ment has his­tor­i­cal­ly been one of the most under­val­ued func­tions with­in an organ­i­sa­tion. In many cas­es, long-term under invest­ment means employ­ees still strug­gle with out­dat­ed, time-con­sum­ing and inef­fec­tive process­es.

Such is the preva­lence of these error-prone process­es, almost a quar­ter of UK busi­ness­es admit they are not con­fi­dent in their tax fig­ures.

How­ev­er, change is com­ing. The gov­ern­ment has intro­duced the Mak­ing Tax Dig­i­tal (MTD) scheme with the aim of mak­ing it eas­i­er for busi­ness­es to get their tax right, there­by reduc­ing tax lost due to avoid­able mis­takes. With the ini­tia­tive, HM Rev­enue & Cus­toms hopes to cre­ate one of the world’s most dig­i­tal­ly advanced tax sys­tems.

The first phase of the scheme was launched ear­li­er this year, affect­ing 1.2 mil­lion VAT-reg­is­tered UK busi­ness­es with tax­able turnover above £85,000. The next step will be to intro­duce dig­i­tal link­ing between soft­ware pro­grams in 2020. How­ev­er, HMRC’s long-term vision is that all busi­ness­es and indi­vid­u­als who do their own tax­es will sub­mit their returns online to HMRC from their own MTD-com­pat­i­ble soft­ware.

At a time when the C‑suite is fix­at­ed on dig­i­tal trans­for­ma­tion, now is the per­fect oppor­tu­ni­ty for com­pa­nies to think about tax trans­for­ma­tion.

The idea is to not only make tax more accu­rate, but to pro­vide a greater lev­el of trans­paren­cy so man­age­ment can make bet­ter busi­ness deci­sions based on its tax posi­tion. For exam­ple, imag­ine the val­ue to the com­pa­ny if the tax man­ag­er could analyse his­tor­i­cal data to pre­dict the next two years’ returns? The tax depart­ment instant­ly moves from being a resource to a busi­ness enabler.

It can be argued that the stakes are sim­ply too high not to con­sid­er automat­ing and digi­tis­ing the tax process. Pay­ing the right tax is syn­ony­mous with good busi­ness prac­tice, and sev­er­al busi­ness­es have hit sig­nif­i­cant finan­cial trou­bles because they didn’t have trans­paren­cy into their finances and tax­es. Investors, too, are demand­ing greater scruti­ny into their company’s tax affairs as the rep­u­ta­tion­al dam­age and sub­se­quent long-term loss of busi­ness can be just as harm­ful as any ini­tial fall­out.

For suc­cess­ful tax trans­for­ma­tion, busi­ness­es need an over­ar­ch­ing view of their organ­i­sa­tion so they can elim­i­nate silos of data and tie all their sys­tems and process­es togeth­er. They should look to auto­mate man­u­al process­es in a way that mir­rors what’s hap­pen­ing across the rest of the busi­ness.

Arkk Solu­tions’ plat­form, for:sight, enables busi­ness­es to auto­mate the entire process, from cleans­ing data to sub­mis­sion. This means chief finan­cial offi­cers (CFOs) and their teams can go beyond com­pli­ance, trans­form­ing their finan­cial report­ing to pro­vide greater trans­paren­cy, con­trol and insight.

While it’s not nec­es­sary to throw every­thing out and start again from scratch as organ­i­sa­tions can take a phased approach to trans­for­ma­tion, it is impor­tant to keep one eye on the future, as trace­abil­i­ty and gov­er­nance will only become more cen­tral to tax report­ing.

The key is engag­ing the right stake­hold­ers to ele­vate tax up the busi­ness agen­da. This means being able to high­light the ben­e­fits of invest­ment in tax to the chief exec­u­tive, the CFO and the IT depart­ment. In the same way they recog­nise the com­pet­i­tive advan­tages that busi­ness trans­for­ma­tion can deliv­er, it’s time for the C‑suite to see the val­ue in tax trans­for­ma­tion and how it can ele­vate their busi­ness.

In 2019, it’s no longer accept­able to rely on spread­sheets cob­bled togeth­er from dis­parate sources across the busi­ness or to extract data from ‘black box’ lega­cy data­bas­es to make the num­bers work.

Instead of sim­ply com­ply­ing with the new MTD reg­u­la­tions, organ­i­sa­tions should look at over­haul­ing their old-fash­ioned process­es and, more­over, con­sid­er how the tax depart­ment can start deliv­er­ing real val­ue and a com­pet­i­tive advan­tage to their busi­ness.

Inter­est­ed in trans­form­ing your tax func­tion? Please vis­it www.arkksolutions.com